Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

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Thematic (Sector/Industry)

The Federal Health Minister has approved an industry-wide average increase in private health insurance premiums of 4.84% to take effect April 1, 2017. We were expecting an increase in the 4.5%-5.0% range and endorse the lowest annual increase in a decade. Despite the decade-low industrywide increase, private health insurance premiums continue to grow at a faster rate than wage growth and significantly higher than consumer price index growth. From an industry perspective, we expect private health insurance market growth to slow in response to ongoing affordability concerns and slowing population growth. The industry average increase is modestly higher than consensus and continues to underpin the profitability of private health insurers.
The industry average was 5.59% for 2016 and 6.18% for 2015. <a href="https://www.smartkarma.com/entities/75" target="_blank" data-smartkarma-citation="entities:75:1" rel="noopener">Medibank Private Ltd (MPL AU)</a> continues to struggle to retain policyholders following a 2.5% decline to 1.8 million in fiscal 2016, whereas <a href="https://www.smartkarma.com/entities/7063" target="_blank" data-smartkarma-citation="entities:7063:1" rel="noopener">NIB Holdings Ltd (NHF AU)</a> increased Australian policyholders 3.8% to 529,000 in fiscal 2016.
Analysts: David Ellis and Ravi Reddy

The Federal Health Minister has approved an industry-wide average increase in private health insurance premiums of 4.84% to take effect April 1, 2017. We were expecting an increase in the 4.5%-5.0% range and endorse the lowest annual increase in a decade. Despite the decade-low industrywide increase, private health insurance premiums continue to grow at a faster rate than wage growth and significantly higher than consumer price index growth. From an industry perspective, we expect private health insurance market growth to slow in response to ongoing affordability concerns and slowing population growth. The industry average increase is modestly higher than consensus and continues to underpin the profitability of private health insurers.
The industry average was 5.59% for 2016 and 6.18% for 2015. Medibank Private Ltd (MPL AU) continues to struggle to retain policyholders following a 2.5% decline to 1.8 million in fiscal 2016, whereas NIB Holdings Ltd (NHF AU) increased Australian policyholders 3.8% to 529,000 in fiscal 2016.
Analysts: David Ellis and Ravi Reddy

Industry-Wide Health Insurance Premiums Increase 4.8% - Broadly in Line with Expectations

Equity Bottom-Up

Following the Australian federal election on July 2, 2016, we are increasingly confident that current healthcare funding arrangements will remain firmly in place, benefiting listed private health insurers Medibank Private and <a href="https://www.smartkarma.com/entities/7063" target="_blank" data-smartkarma-citation="entities:7063:1">Nib Holdings Ltd (NHF AU)</a>. With much-needed healthcare funding reform politically unpalatable for the foreseeable future, we think the strong profits and high returns on equity earned by the two listed insurers are well supported and are under no major pressure.New CEO Craig Drummond started on July 4; in our view, he will take advantage of the political landscape to drive short- to medium-term profit growth as he oversees improvements in operational efficiency, reduces costs, improves policyholder retention and growth, and improves health benefit claims management. We expect the fine-tuning of product design, hospital contractual procurement, benefit utilisation, and hospital claims costs to further boost Medibank’s health insurance gross margin.Analysts: David Ellis &amp; Nathan Zaia

Following the Australian federal election on July 2, 2016, we are increasingly confident that current healthcare funding arrangements will remain firmly in place, benefiting listed private health insurers Medibank Private and Nib Holdings Ltd (NHF AU). With much-needed healthcare funding reform politically unpalatable for the foreseeable future, we think the strong profits and high returns on equity earned by the two listed insurers are well supported and are under no major pressure.New CEO Craig Drummond started on July 4; in our view, he will take advantage of the political landscape to drive short- to medium-term profit growth as he oversees improvements in operational efficiency, reduces costs, improves policyholder retention and growth, and improves health benefit claims management. We expect the fine-tuning of product design, hospital contractual procurement, benefit utilisation, and hospital claims costs to further boost Medibank’s health insurance gross margin.Analysts: David Ellis &amp; Nathan Zaia

Political Inertia Underpins Strong Earnings for Medibank

As a consequence of increasing global risks, tougher regulatory demands, intensifying pressure on net interest margins, higher bad debts and lower than expected returns on equity we reduce earnings forecasts, fair value estimates and rebase medium- to longer-term dividend payout ratios lower to more sustainable long-term levels for three of the four wide moat-rated Australian banks: Commonwealth Bank of Australia, National Australia Bank and Westpac Banking Corporation. We cut Australia and New Zealand Banking Group's earnings forecasts and fair value estimate in March 2016 and now rebase its longer-term dividend payout ratio lower. Our preferred banks are the big retail-focused, New South Wales-based, banks Westpac and Commonwealth Bank due to their lower risk profiles, higher ROEs, higher NIMs, lower cost/income ratios, consistently lower-loan-loss rates, less volatility in earnings, and larger exposures to the strongly performing New South Wales economy.Analyst: David Ellis

As a consequence of increasing global risks, tougher regulatory demands, intensifying pressure on net interest margins, higher bad debts and lower than expected returns on equity we reduce earnings forecasts, fair value estimates and rebase medium- to longer-term dividend payout ratios lower to more sustainable long-term levels for three of the four wide moat-rated Australian banks: Commonwealth Bank of Australia, National Australia Bank and Westpac Banking Corporation. We cut Australia and New Zealand Banking Group's earnings forecasts and fair value estimate in March 2016 and now rebase its longer-term dividend payout ratio lower. Our preferred banks are the big retail-focused, New South Wales-based, banks Westpac and Commonwealth Bank due to their lower risk profiles, higher ROEs, higher NIMs, lower cost/income ratios, consistently lower-loan-loss rates, less volatility in earnings, and larger exposures to the strongly performing New South Wales economy.Analyst: David Ellis

Challenges Mount for the Wide Moat-Rated Australian Banks

Founder and CEO, Europacifica Consulting

Naomi Fink

Founder and CEO

Europacifica Consulting

Macroeconomics

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/009/868/original/Chart2.Australia.Risk_.Pref_.png?1467594254" class="editor-image img-responsive" data-smartkarma-image-id="9868"><figcaption class="figcaption">Australians risk-averse? Not today, mate (Source: Europacifica)</figcaption></figure> Speculation that Australia will lose its <a href="http://www.afr.com/news/politics/election/election-2016-the-trafficjam-political-culture-threatening-aaa-credit-rating-20160703-gpxil9" target="_blank">AAA rating</a> due to political deadlock at the polls has probably been enhanced by <a href="http://www.telegraph.co.uk/business/2016/06/27/george-osborne-to-speak-in-attempt-to-calm-markets-following-bre/" target="_blank">the final downgrade</a> to the UK's own rating, motivated by the recent EU referendum.  Medium-term, the "lucky country" might very well escape the fate of capital flight, given there are many more controversial events (such as US elections) that affect Australia little. Whenever appetite for risk revives…

Australians risk-averse? Not today, mate (Source: Europacifica) Speculation that Australia will lose its AAA rating due to political deadlock at the polls has probably been enhanced by the final downgrade to the UK's own rating, motivated by the recent EU referendum.  Medium-term, the "lucky country" might very well escape the fate of capital flight, given there are many more controversial events (such as US elections) that affect Australia little. Whenever appetite for risk revives…

FX Strategist

Greg Gibbs

Fundamental analysis of topical themes in FX

Amplifying Global FX Capital

Amplifying Global FX Capital was founded in 2015 and is fully owned by Greg Gibbs. It is a registered company both in Australia and Colorado, USA and is a licensed in Australia to provide financial services.

We are producing a regular trading view orientated macroeconomic analysis of topical themes in global financial markets, with a particular focus on foreign exchange. We invite you to view an “executive summary” of these reports in “AmpGFX Reports” under our “Research” menu.

These reports are drawn from the analysis of Greg Gibbs and inform the capital management he undertakes on behalf of the company. The trading performance is posted periodically on our website. We aim to build our company into both a research and capital management business. We are currently in the planning phase for managing capital for wholesale customers.

Greg Gibbs has spent his working life of more than 26 years in financial markets, beginning in 1989 at the Reserve Bank of Australia, after completing a Bachelor of Economics Degree (Honours) at the Australian National University. He has been a CFA Charterholder since 2005. He has worked in Sydney, Singapore, New York and London for major global banks and presented on foreign exchange markets to major financial institutions and companies around the world, and maintained a high profile in the financial media.

Before Amplifying Global FX Capital, Greg was the Head of Asia Pacific Market Strategy at the Royal Bank of Scotland based Singapore. He now resides in Breckenridge Colorado.

We think the case is clear for the RBA to cut rates tomorrow and are predicting this outcome.  The much lower core inflation reading, evidence of tightening bank credit conditions, some softening recently in credit growth, cooler job vacancies, a stronger AUD, some renewed doubts on China and timing of the 2 July election suggest the RBA needs to be decisive and get ahead of expectations.  Consequently we see further weakness in the AUD and continue to favour gold as we discussed last week outlining risks in China that may spill over to global asset markets and the rebounding JPY that may push the BoJ toward more easing.

We think the case is clear for the RBA to cut rates tomorrow and are predicting this outcome.  The much lower core inflation reading, evidence of tightening bank credit conditions, some softening recently in credit growth, cooler job vacancies, a stronger AUD, some renewed doubts on China and timing of the 2 July election suggest the RBA needs to be decisive and get ahead of expectations.  Consequently we see further weakness in the AUD and continue to favour gold as we discussed last week outlining risks in China that may spill over to global asset markets and the rebounding JPY that may push the BoJ toward more easing.

Australia

NIB Holdings Ltd. offers health insurance products.  Depending on the specific product, the Company covers ambulance costs; and reimburses for costs not covered by Medicare including dental, optical, physiotherapy and natural therapies; and some hospitalization costs.

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nib holdings (NHF AU)

Industry-Wide Health Insurance Premiums Increase 4.8% - Broadly in Line with Expectations

The Federal Health Minister has approved an industry-wide average increase in private health insurance premiums of 4.84% to take effect April 1,...

Morningstar, Inc.

Political Inertia Underpins Strong Earnings for Medibank

Following the Australian federal election on July 2, 2016, we are increasingly confident that current healthcare funding arrangements will remain...

Morningstar, Inc.

Challenges Mount for the Wide Moat-Rated Australian Banks

As a consequence of increasing global risks, tougher regulatory demands, intensifying pressure on net interest margins, higher bad debts and lower...

Morningstar, Inc.

Australia a Risk Haven? Not Today, Mate

Speculation that Australia will lose its AAA rating due to political deadlock at the polls has probably been enhanced by the final downgrade to...

Naomi Fink

AmpGFX - RBA Cut the Obvious Decision

We think the case is clear for the RBA to cut rates tomorrow and are predicting this outcome. The much lower core inflation reading, evidence of...

Greg Gibbs

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