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NIB Holdings (ASX: NHF) is an insurance company, with rising revenue and margin expansion highlighting a successfully executed growth strategy. They announced their annual results a few weeks ago, but recently noticed a mistake in their presentation which was announced to the ASX. The mistake related to cost increases. The change in both total costs and hospital benefits was positive for investors, which highlighted margin expansion was greater than investors realised.
NIB holdings grew profits last year at a faster rate than most of the industry (Credit: NIB)
One key recent initiative was the launch of Amazon Alexa Skill, which helps members find a healthcare provider. This works in favour of smaller providers, because it allows them to attract customer attention in ways which they would not otherwise be able to do. The company increased net profits by 11.8% to $149.3m, while also boosting their net investment income by $36.1m. Net interest income is an important aspect of insurance companies, because they have a large amount of capital reserves that they can gain investment income from. While insurance companies typically invest most of their assets in safe asset classes like bonds, investment performance can be a big differentiator across the business.
The company is focussing heavily on the transition from what the company calls “sickcare” to healthcare. By this, they are catering to consumers who want solutions that are engaging and help them decide what they want to do. One example is biometric devices, which can monitor factors like heart rates and blood pressure to predict and avoid heart attacks and strokes before they happen. Identifying and preventing health problems before they happen also helps the insurance company minimise large claims, allowing them to charge prices lower than what competitors are offering. NIB is also trying to develop a sustainable competitive advantage from a machine learning platform which can predict health risk and price insurance accordingly.
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).
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