Portfolio Changes - Increasing Medibank and reducing Suncorp
Australian Equities Income Portfolio
Increasing Medibank (MPL)
We have added to our position in Medibank. A recent meeting with Medibank management provided a timely update on the cybercrime incident. While investigations are continuing at operational and regulatory level, Medibank indicated that net impact to policy holders lapsing their cover has been minimal.
Medibank continues to acquire policy holders across each of its businesses and retention has held up. Interestingly, Medibank is still seeing solid policy holder growth from young members (25yrs-40yrs age).
The net cost to date has been a $25m-$35m support package for customers and deferment of the CY22 premium increase. To date, the near- term negative impact on the share price has exceeded the negative earnings impact.
Reducing Suncorp (SUN)
We have reduced our position in Suncorp. We believe the solid volume growth in 1Q23 in Suncorp Bank and improvement in investment yields from rising interest rates have been reflected in the share price, therefore we have realised part of the 12.7% capital gain since we initiated Suncorp in the portfolio in March 2021.
With La Niña weather events remaining persistent into the summer, we expect further headwind from a higher natural hazards allowance and higher reinsurance costs.
Whilst we wait for the determinations of regulatory approvals for the sale of bank to ANZ, we remain cautious on impacts of higher interest rates on mortgage lending activities.