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NIB share price in focus following FY 2020 results release

private health insurance

The NIB Holdings Limited (ASX: NHF) share price will be in focus today following the release of its full year results.

How did NIB perform in FY 2020?

For the 12 months ended 30 June 2020, the private health insurer reported a 3.4% increase in total revenue to $2.5 billion. This was driven by premium increases in 2019 and all of its health insurance businesses growing their membership numbers. The latter saw the company report policyholder growth of 1.9% for the year, compared to industry growth of 0.4%. This means NIB accounted for more than 41% of total industry growth for the year.

Things weren’t as positive for its earnings due to a sizeable increase in claims expense. NIB’s claim expense (including a deferred claims provision of $98.8 million) was up 6.7% to $1.9 billion in FY 2020. This ultimately led to its underlying operating profit falling 25.6% to $150.1 million for the year.

Also weighing on its profits were volatile markets, which led to net investment income falling 54% to $16.6 million over the period. This led to the company posting a net profit after tax of $89.2 million, down 40.3% on the prior corresponding period. According to CommSec, the market was expecting a net profit after tax of $95.02 million. So this profit result is a little short of expectations.

Despite the sizeable profit decline, the company has still declared a final dividend. It will pay shareholders a fully franked 4 cents per share final dividend, down from a final dividend of 13 cents per share last year. This brought its full year dividend to 14 cents per share, compared to 23 cents per share in FY 2019.

Outlook.

NIB advised that it continues to target net organic policyholder growth of 2% to 3% in Australian residents health insurance business. And while it is wary about macroeconomic threats, current market conditions look conducive.

In addition to this, it notes that the sector outlook in New Zealand is similar and market conditions in other businesses remain challenging. Though, for the latter, it feels the longer-term fundamentals are good.

The company’s Managing Director, Mark Fitzgibbon, commented: “COVID-19 remains a confounding factor in our planning and forecasting. It’s implication for sales, claims, expenses, investment income and earnings is enormous. Nevertheless, we have cause to have confidence in our arhi and New Zealand businesses and we’re adjusting strategy in other parts of the Group to adapt to current circumstances,”

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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.

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