** Jefferies says 1QFY26 data from the Australian Prudential Regulation Authority (APRA) shows a modest increase in participation in private health insurance $(PHI)$, with hospital policies 2.2% higher and hospital benefits 5.7% higher over the year

** Participation continues to track higher as does Australia's population and despite expectations for slower industry growth into FY26, says brokerage

** An overstretched public health system remains supportive of private health insurance membership with Australians continuing to prioritise cover - Jefferies

** Out-of-pocket payments by policyholders up 10.8% over the year for hospital treatments and 5.4% for ancillary treatments; expect higher out-of-pocket payments to continue, says brokerage

** Brokerage says Australians continue to value PHI, despite rising inflation and out-of-pocket payments, perhaps due to protracted waitlists for both appointments and elective procedures in the public system nationwide

** Brokerage prefers Medibank Private MPL.AX over nib Holdings NHF.AX NHF with its dominant market share supportive of discussions with government, supplier negotiations and health management innovation

** YTD - MPL and NHF up 25.3% and 30.8%, respectively

(Reporting by Sherin Sunny in Bengaluru; editing by Diane Craft)

((Sherin.Sunny@thomsonreuters.com))