The NIB Holdings Limited (ASX: NHF) share price is pushing higher on Thursday after the release of an announcement.
At the time of writing the private health insurer’s shares are up 3% to $4.77.
What did NIB announce?
This morning NIB responded to an announcement by the Australian Prudential Regulation Authority’s (APRA) which urged private health insurers to provision in FY 2020 for a presumed catch up in treatment and claims post-pandemic.
In a letter to private health insurers, APRA directed capital requirements allow (as a general liability) an expectation of hospital and allied treatment deferred during the course of COVID-19 to now occur during FY 2021.
In response to this, NIB has confirmed that its forecast capital position remains well ahead of regulatory requirements, internal targets, and allows for APRA’s announcement.
The company’s Managing Director, Mark Fitzgibbon, commented: “The impact of COVID-19 on healthcare treatment and claims remains unclear and we’ll only be in a position to finalise an estimate of a liability once FY20 actual claims experience is clearer. Nevertheless, we’ve modelled APRA’s direction and expect to have a level of retained capital well ahead of APRA’s minimum capital requirement as well as nib’s own internal target.”
The managing director was supportive of APRA’s conservative position on the pandemic and noted that “COVID-19 was having an ongoing impact upon a range of factors beyond that encountered in April and May when medical and other clinical activity was at its nadir.”
Mr Fitzgibbon explained: “Yes we saw a significant drop off in hospital and allied treatment, most of which will return or is already returning this current financial year. Yet we suspect an underlying impact on what we would normally expect in treatment volumes.”
“First, there are possible limitations on the healthcare system’s capacity in FY21 to accommodate the additional deferred treatment. Second, we suspect there may be an aversion to treatment and especially hospitalisation while ever the threat of COVID-19 survives. Only time will tell,” he concluded.
What about NIB’s dividend?
NIB may have paid an interim dividend in April, but its final dividend remains uncertain.
The company advised that its final dividend will only be considered by the board once its accounts for FY 2020 were finalised.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended NIB Holdings Limited. 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 Scott Phillips.