Why the Medibank (ASX:MPL) share price surged 4% higher today

The Medibank Private Ltd (ASX: MPL) share price has lifted 4.1% higher in today's trade after an early morning market announcement.

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The Medibank Private Ltd (ASX: MPL) share price is surging more than 4% higher today to start the pre-Christmas trading week strongly.

This follows a market update this morning on changes to its health insurance premiums from April next year.

Why is the Medibank Private share price surging?

The Aussie private health insurer has received approval to increase its Medibank and ahm health insurance premiums. From 1 April 2021, premiums will rise by an average of 3.25% – the lowest average premium increase in 20 years.

The Medibank share price has rocketed 4.1% higher to $3.05 per share today. The news buoyed investors in an otherwise soft day of trade on the ASX across sectors.

It's been a tough year for Aussie health insurers with the Medibank share price falling 4.2% lower in a year dominated by coronavirus concerns.

The story is similar for the NIB Holdings Limited (ASX: NHF) share price today. Shares in the rival health insurer have climbed 3.1% higher today but remain down 9.5% for the year.

The NIB share price has also surged after the company announced an average premium increase from 1 April next year of 4.36% across all products. In contrast to Medibank, that premium increase is higher than the 3-year average premium increase of 3.55%.

NIB managing director Mark Fitzgibbon noted the impact of the planned premium increase. NIB's annual average premium per single equivalent unit will be $2,844 compared to an industry average of $3,119.

Foolish takeaway

The Medibank share price has been a bright spot in a soft start to the week for the S&P/ASX 200 Index (ASX: XJO).

The benchmark Aussie index is down 0.1% to 6,669 points as COVID-19 concerns continue to hang over markets. WiseTech Global Limited (ASX: WTC) and AGL Energy Limited (ASX: AGL) are among the biggest losers on Monday.

Medibank now boasts a market capitalisation of $8.4 billion with a price to earnings (P/E) ratio of 26.7 and a 3.9% dividend yield.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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