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NHF

Nib Holdings Limited FY19 profits – Solid Result

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

Nib Holdings Limited (ASX: NHF) provides health and medical insurance to Australian and New Zealand residents. Nib also provides health insurance to international students and workings in Australia. Nib has a market capitalisation of A$3.5 billion.

nib holdings

What are the results from Nib FY19?

  • Total group revenue for FY19 is A$2.4 billion, up 8.3 per cent from FY18.
  • NPAT for FY19 is A$149.3 million, up 11.8 per cent from FY18.
  • Underlying operating profit for FY19 is A$201.8 million, up 9.2 per cent from FY18.
  • Statutory earnings per share for FY19 is 32.9 cents, up 11.9 per cent from FY18.
  • Final dividend (fully franked) for FY19 is 13.0 cents, up 18.2 per cent from FY18.

Specific results on company operations are as follows:

  • Underlying revenue from Australian Residents Health Insurance for FY19 is A$2,016.0 million, up 7.6 per cent from FY18.
  • Underlying revenue from International (Inbound) Health Insurance for FY19 is A$110.8 million, up 17.0 per cent from FY18.
  • Underlying revenue from Nib New Zealand for Fy19 is A$215.5 million, up 8.8 per cent from FY18.
  • Underlying revenue from Nib Travel for FY19 is A$74.5 million, up 12.7 per cent from FY18.

 

What were the drivers of this result?

Nib management noted that their international students and workers delivered another impressive result with net policyholder growth of 20 per cent. New Zealand also saw positive net policyholder growth of 7.2 per cent.

Nib management also noted the following: “The business is doing well, with sales up 6.8 per cent for the year despite weakness in the Australian market. We just need to do a better job in the domestic market, capture more value along the supply chain as we’re now doing in Europe with our new operations in Ireland and aligning our operating and acquisition costs with income”.

 

What is the outlook for Nib?

The outlook for Nib’s operations include:

Australian Residents Health Insurance:

  • Organic growth of 2 – 3 per cent per annum.
  • Insurance margins of 6 per cent.

International (Inbound) Health Insurance:

  • Continued organic growth with strong insurance margins. Student platform sales growth expected for FY20.

New Zealand health insurance:

  • New Zealand health insurance should have continued growth with insurance margins of 8 – 9 per cent.
  • Further investments and growth in Maori population health.

Nib travel:

  • Improved domestic sales performance, continued strong international sales and value capture and reduced operating costs.

Nib’s management also noted that “Relatively low levels of claims inflation in recent years have resulted in Australian Residents Health Insurance’s insurance margins (7.3% in FY19) being well ahead of the long-run target range of 5 to 6 per cent. As indicated in previous guidance, Nib does not expect this position to continue indefinitely. We currently believe a net margin in the order of 6 per cent is more likely moving forward”. Underlying operating profit in FY20 is expected to be around A$200 million, the same level as in FY19.

 

What is the market reaction?

The initial market reaction to Nib’s FY19 results is slightly negative. Today (19 August 2019) Nib is down 3.5 per cent and is currently trading at a price of A$7.36 (11.55am). Nib has a P/E ratio in the mid-twenties and has an annual dividend yield of 2.8 per cent.

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978) (“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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