The NIB Holdings Limited (ASX: NHF) share price will be on watch today after reporting its FY19 result.
NIB is one of the ASX’s largest private health insurers, it was founded in 1952. NIB provides health and medical insurance to over 1.5 million Australian and New Zealand residents. NIB also provide health insurance to more than 160,000 international students and workers in Australia. It’s also Australia’s third largest travel insurer and global distributor of travel insurance through its World Nomads Group business.
NIB’s Healthy FY19 Report
The private health insurer reported that its group underlying revenue rose by 8.3% to $2.4 billion. Meanwhile, the group claims expense (excluding travel claims) only increased by 6.9% to $1.8 billion.
NIB revealed that it achieved net policyholder growth of 2.1% for the year, which although low, would likely be fairly impressive growth compared to the rest of the private health insurance industry.
Whilst the company continues to diversify its operations and earnings, its Australian resident health insurance business still accounts for almost 75% of group operating profit.
Group underlying operating profit (UOP) grew by 9.2% to $201.8 million and net profit after tax grew by 11.8% to $149.3 million.
The ‘other’ businesses made a combined underlying operating profit of $61.3 million. The international students and workers business grew net policyholders by almost 20%, UOP grew by 17.9% to $34.9 million.
However, both the New Zealand and travel business saw small declines.
NIB Management Comments
NIB CEO and Managing Director Mark Fitzgibbon said: “Market conditions have been challenging for a range of reasons. There’s broad weakness in consumer discretionary spending, fierce competition for that spending and private health insurance has some issues around cost and affordability, especially out of pocket expenses for members.”
The NIB Board decided to pay a final dividend of 13 cents per share, bringing the full year dividend to 23 cents – an increase of 15%.
Is NIB A Buy?
NIB is expecting to make a group UOP of at least $200 million in FY20, including the likelihood of higher claims inflation and lower Australian resident health insurance margins.
This result would mean profit would be at least flat compared to FY19, which is not a bad result all things considering. But, I’m wary of investing until there’s a solution to the problem of high costs of the insurance causing young people leaving and rising costs from an ageing population.
I think the below growth shares in the free report below could be a better idea for the long term.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.