NIB Holdings Limited (ASX:NHF) should continue to grow strongly over the next five years as it benefits from favourable industry dynamics. Despite the share price rising over the past 12 months from $2.03 to $3.14, I believe there is more upside.
NIB recently announced an alliance with Apia Insurance – a specialist in the over 50's age group. Apia offers home and motor vehicle insurance. Greater than four million Australians aged over 50 hold private health insurance and this number is growing at 3% annually and therefore it is an important strategic alliance for NIB.
NIB is also set to benefit from favourable market dynamics. Approximately half of Australia's population is covered by private health insurance. Despite the high cost of insurance and access to free government-funded healthcare, the number of Australians taking out private health insurance is increasing rapidly. This is due to the taxation benefits (and associated penalties), shorter wait times, choice of hospital and cover in ancillary health services.
Importantly, the private health industry continues to gain strong government support and will likely continue to do so going forward, as increasing pressure on the public healthcare system has resulted in the government supporting a greater role for the private sector.
At the current share price of $3,14, NIB represents good long-term value. Furthermore, the company pays a good and growing dividend of 3.3%.
