Shares of private health insurer, NIB Holdings Limited (ASX: NHF) opened 3% lower in trade this morning following the release of its half-year results.
Despite increasing both revenue and profit for the six months to 31 December 2014, NIB's profit guidance for the remainder of the year may explain why its shares have fallen.
Here are six things you need to know from today's report.
- Group operating profit increased 1.7%, to $42.1 million
- Net premium revenue increased 9% to $802.3 million
- Earnings per share jumped to 9.4 cents, from 9 cents per share a year earlier
- An interim dividend of 5.5 cents per share, fully franked, was declared, up from 5.25 cents in the prior period
- Total claims increased 8.8% to $612.5 million.
- Management confirmed its previous financial year 2015 profit guidance, but said it expected the result to be at the lower end of the previous range provided to the market (between $75 million and $82 million)
Today's results are a testament to the increasing uptake of private health insurance and the current high levels of competition within the market.
NIB Managing Director, Mark Fitzgibbon, described today's results as, "solid" given the heavy competition for sales, industry churn and less buoyant market conditions.
"We exist to pay claims and claims growth is indicative of private health insurance playing an increasing role in funding our healthcare. That's a vitally important trend given the immense strain on the public system and the need for more private sector involvement," Mr Fitzgibbon said.
Mr Fitzgibbon also noted the performance of NIB's international workers' health insurance and international student health insurance offerings, which both experienced solid growth in the half.
NIB Options – a program designed for locals travelling overseas for medical care – posted a loss of $2.6 million, whilst NIB New Zealand – a business it acquired in 2012 – achieved net policyholder growth of 3.3%, after a decade of declines.
Should you buy, hold or sell NIB Holdings shares?
At today's price of $3.57, NIB shares trade at around 22x earnings and on a forecast dividend yield of 3.2% fully franked. Given the outlook of slower growth and higher levels of competition, NIB is in my opinion worthy of a 'hold' rating today.
