Australian health care fund nib Holdings Ltd (ASX: NHF) has come off nearly 15% to an eight month low at market open after downgrading its profit guidance by $30 million, making it the worst performer in the ASX 200 today. NIB announced that their group underlying operating profit (UOP) was likely to be $170 million, down from the original forecast of $200 million, blaming higher than expected claim costs across a number of the Group’s underlying business lines.
nib Health Funds Group (ASX: NHF) has plummeted nearly 15% at market open, down to $5.66 per share, after a downgrading its profit guidance by $30 million, making it the worst performer in the ASX 200 today. (Credit: iTnews)
NIB managing director Mark Fitzgibbon said that the $30 million downgrade was spread evenly across the core business Australian resident’s health insurance, adjacent businesses, and one-off costs including data mining joint ventures and underwriting environments. Fitzgibbons says that NIB’s margins “appear to be something of the past”, and that it is likely that the Company’s dividend payout ratio could get as high as 70 to 80%.
The stock currently has a market capitalization of $3 billion and is trading on a trailing P/E of 20x and a forward consensus P/E multiple of 17x, meaning the market is pricing in earnings growth. The company is expected to pay a fully franked dividend of 3.52% in 2020.
The news comes after Medibank Private Ltd (ASX: MPL) announced in November that it had been caught $21 million short after claims had increased at a greater rate than anticipated. Thus, nib’s latest downgrade will do little for the health insurance industry, which is under great pressure given squeezed margins from an ageing population and declining memberships among young consumers.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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