MENU

NIB Holdings to increase premiums

Shares in NIB Holdings (ASX: NHF) have received a pre-Christmas boost after the insurer announced that it had received approval from the federal government to increase its premiums by an average 7.99% across all products.

The increase in premiums was necessary for the company given the rising costs of providing healthcare services as well as NIB’s contribution to the risk equalisation scheme, whereby the company’s payouts to customers had climbed higher than $1 billion – more than a 10% increase compared to the previous financial year.

NIB’s CEO, Mark Fitzgibbon said: “While every effort has been made to keep premium increases as low as possible, rising medical and healthcare costs as well as customer utilisation means we need to increase premiums to maintain the level of health cover and benefits our customers have come to expect.”

While the increase in premiums will differ across products, more than 70% of customers will only be hit with an increase of less than $3 per week following the changes. The company’s shares have soared to $2.55 since the announcement was made, which is just 5c short of their all-time high of $2.60. The changes will come into effect 1 April 2014.

Foolish takeaway

Although the company’s shares have performed strongly in recent times, NIB still presents as an excellent investment opportunity for investors going into 2014. While Morningstar has predicted earnings per share (EPS) growth of 20% in FY14 as well as a 10% increase in dividends, a low interest rate environment, population growth and mounting concerns regarding the public hospital system should push it towards another strong performance.

Furthermore, despite the increases to the insurer’s premiums, NIB still remains as one of Australia’s most affordable health funds, meaning that it should continue to attract more and more customers going forward.

Get the full report on our top dividend stock for 2014 — FREE!

If you are looking for some stock ideas to add to your portfolio today, look no further than our #1 dividend-paying stock. Discover The Motley Fool's favourite income idea for 2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2014."

Motley Fool contributor Ryan Newman owns shares in NIB Holdings.

5 ASX Stocks for Building Wealth After 50

I just read that Warren Buffett, the world’s best investor, made over 99% of his massive fortune after his 50th birthday.

It just goes to show you… it’s never too late to start securing your financial future.

And Motley Fool Chief Investment Advisor Scott Phillips just released a brand-new report that reveals five of our favourite ASX stocks for building wealth after 50.

– Each company boasts strong growth prospects over the next 3 to 5 years…

– Most importantly each pays a generous dividend, fully franked.

Simply click here to find out how you can claim your FREE copy of “5 ASX Stocks for Building Wealth After 50.”

See the stocks now