NIB Holdings Limited shares soar 8% on profit result

Credit: Keoni Cabral

The NIB Holdings Limited (ASX: NHF) share price soared 6.7% this morning following the release of its half-year financial report.

In the six-month period ended 31 December 2015, NIB Holdings reported a 13% increase in revenue to $934.4 million and a net profit of $43.4 million, up 5% on the prior corresponding period.

The company enjoyed a 12.5% increase in net premium revenue and reported a 10.4% rise in claims incurred, allowing the gross margin to expand from 16.5% to 18%. NIB’s management expense ratio rose from 10.5% to 10.9%. Net investment income fell from 3.7% to 1.1%.

The company said the margin increase was driven by the group’s Australian Residents Health insurance (arhi) business.

“Our arhi business improved sales and underwriting performance considerably for the period, with an underlying operating profit of $51.7 million,” NIB Holdings’ managing director, Mark Fitzgibbon, said. “arhi continues to be our core business accounting for almost 80% of total Group underlying operating profit for the period.”

Pleasingly, the company announced a fully franked interim dividend of 5.75 cents per share, up from 5.5 cents per share last year. The dividend is payable 1 April 2016.

NIB said, “Net policyholder growth for the first half was 1.8%, which we expect will again be well above the industry average.” Curiously, though, it said, “At the time of finalising nib’s 2016 half year results APRA had not published the comparable industry statistic.”

The company’s New Zealand business increased operating profit significantly, but the International (Inbound) Health Insurance business reported a fall in operating profit.

Looking ahead, Mr Fitzgibbon believes the recent Private Health Insurance review will be a net positive for health insurers and consumers.

“With real health care spending expected to grow in the order of GDP plus 2%, it’s inevitable Government will shift funding to the private sector,” Mr Fitzgibbon said. “As a nation we’re simply running short of the tax payers sufficient to fund ‘free’ healthcare to an increasing number of older retired Australians.”

NIB Holdings confirmed its full 2016 financial year profit outlook, saying the result will be at the upper end of its underlying operating profit range between $102 million and $114 million, with statutory profit between $90 million and $100 million.

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Motley Fool writer/analyst Owen Raszkiewicz owns shares of NIB Holdings Limited. Owen welcomes -- and encourages -- your feedback on Google+, LinkedIn or you can follow him on Twitter @ASXinvest.

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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