Positive Momentum Makes NIB (NHF) Stock To Watch


NIB Limited Logo NHFNIB Holdings (NHF) is a health insurance company, providing affordable health cover to almost 880,000 people nationwide.

Established over 50 years ago, with premium revenue of more than $1 billion in 2012, NHF is Australia’s fifth largest health fund and the only ASX-listed health insurer.

The company offers a wide range of policies suitable for customers across the board, but its focus on the youth market has helped it to achieve the fastest growth amongst the major players in the sector.

FY12 Results

NHF’s FY12 results continued to show the growth that we have come to expect from the company, as the below demonstrates.

Premium revenue over FY12 grew 11.5% to $1.12 billion.

Net underwriting profit was $70.7 million, which was a 15% increase on the prior corresponding years. EPS was 14.8 cents per share, which was a jump of 8% on the prior years.

Impressively, return on equity climbing 31.5% over 2012, to 21.7%. The group also has a healthy balance sheet, with no debt and operating cash flow increasing 52.4% to $134.6 million.

Strategy for growth

NHF has solid policy growth of 4.7%, which was well above the average industry growth rate of 3.7%.

The company’s growth has been driven by its focus on people under the age of 40, but has been slowly expanding its base and looking to increase in the following areas:

  • Over 55s
  • Corporate market
  • Western Australian market
  • International workers and students

We believe that increased investment on the above mentioned areas will be of benefit to NHF going forward. The company also has room for expansion, with no debt and $134.6 million in operating cash flow generated over FY 2012.

Outlook

NHF’s core health insurance business saw all of its key metrics improve in FY12, with policy subscriber growth complemented by a successful implementation of a price increase.

We think the company is in a great financial position to grow its earnings either via acquisition or organic investment. Given the current falling interest rate environment we could see another movement back into income stocks such as NHF – with a current dividend yield of 5.5%.

We think the NHF’s earnings growth potential and solid dividend yield will continue to deliver gains for its share price.