In morning trade the NIB Holdings Limited (ASX: NHF) share price has pushed higher following the release of its half year results and an upgrade to its full year guidance.
At the time of writing the private health insurer's shares are up 1% to $5.90.
What happened in the first half?
For the six months to December 31, NIB posted an underlying operating profit of $114.3 million on underlying revenue of $1,200 million. This was an 18.6% and 10.9% increase, respectively, on the prior corresponding period.
On the bottom line the company posted a 4.8% lift in half year net profit after tax to $74.3 million and a 1.2% lift in underlying earnings per share to 17.4 cents.
The NIB board declared a 10 cents per share dividend, up 11.1% on the prior corresponding period.
What drove the solid operating result?
According to the company's managing director, Mark Fitzgibbon, it defied industry headwinds thanks to the good progress it has made on a number of fronts such as better managing healthcare provider fees and helping members manage health risk and sickness.
Mr Fitzgibbon said: "Our core business Australian Residents Health Insurance (ARHI) funded more than 151,000 hospital admissions and over 1.8 million ancillary treatments with claims rising 7.8% to over $800 million. It highlights the growing and vital role private health insurance plays in our nation's healthcare. However, a combination of pricing, organic growth, an increased contribution from our new GU Health business and improved claims management saw our net profit margin increase."
In addition to this, despite membership across the industry growing only 0.3% during the period, NIB's Australian Residents Health Insurance numbers grew 1.1% on the prior corresponding period.
Elsewhere, International (inbound) health insurance policyholders grew 8.8% and in New Zealand policyholder growth was 1.7%.
What's next?
Management has warned that it does not expect the second half to be as strong as the first due to unfavourable claims seasonality, weak market conditions, and the fact the first half was boosted by a claims provision release within the ARHI business.
Nevertheless, the company has upgraded its full year guidance and expects underlying operating profit of at least $195 million and statutory operating profit of at least $178 million. This compares to previous guidance of $190 million and $168 million, respectively.
Should you invest?
Whilst I've been impressed with the first half performances of both NIB and Medibank Private Ltd (ASX: MPL), I have concerns that things could go downhill from here if Labor wins the next election and caps health insurance premium increases.
As a result, I intend to stay clear of these companies for the time being and see how they fare over the next 12 months.
