'Real opportunity': NIB (ASX:NHF) share price slips following first-half results

The NIB share price had a mixed trading session.

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Key points

  • NIB shares ended the day down 0.15% to $6.63 
  • The company reported growth across key financial metrics, with NPAT soaring 24.7% to $81.2 million
  • The Board declared a fully franked interim dividend of 11 cents per share

The NIB Holdings Limited (ASX: NHF) share price is edged lower on Monday. This follows the release of the private health insurer's first half results for the 2022 financial year.

After spending much of the day in the red, NIB shares finished trading at $6.63, down 0.15%.

Let's take a look at what the company reported for the front-end of FY22.

NIB share price fails to take off despite growth across key metrics 

The NIB share price finished in the red today after the company delivered its results for the 6 months ending 31 December 2021. Here are some of the key highlights:

  • Total group revenue of $1.35 billion, up 8.3% on the prior corresponding period (H1 FY21 $1.25 billion);
  • Group expense claim of $1.06 billion, up 6.4% (H1 FY21 $1 billion);
  • Group underlying operating profit (UOP) of $109.6 million, up 28.5% (H1 FY21 $85.3 million);
  • Net profit after tax (NPAT) of $81.2 million, up 24.7% (H1 FY21 $65.1 million); and
  • Fully franked interim dividend of 11 cents per share, up from 10 cents per share.

What happened in H1 FY22 for NIB?

NIB experienced a strong first half operating performance, driven by premium revenue growth of 8.2% due to an uplift in policyholders.

In addition, COVID-19 related disruptions to elective surgery and allied healthcare, such as dentistry contributed to the result.

Arhi (Australian Residents Health Insurance) recorded policyholder sales growth and retention. Net arhi policyholder growth lifted to 2.8% to 653,000 new policyholders.

This was partly propelled by elevated community awareness for financial protection and risk of disease as a result of COVID-19. Resumption of previously suspended policies and the benefits of arhi's distribution strategy also attributed to the result.

Furthermore, its New Zealand branch saw stable performance, with revenue growth of 13.8% added to the business.

Both the international inbound and travel businesses (iihi) continued to be mixed as a result of border closures. Each segment reported varying results as NIB implemented cost reduction and business efficiency measures.

What did management say?

NIB managing director, Mark Fitzgibbon commented on the result, saying:

There's little doubt the pandemic has reinforced the importance of good health and the value of private health insurance. This translated into strong policyholder growth across our Australian and New Zealand health insurance businesses. Conditions haven't been as positive in our international students and travel insurance businesses but as COVID-19 passes these will bounce back.

Ongoing COVID-19 lockdowns and restrictions on non-urgent elective surgery, as well as visits to the dentist and other healthcare providers, continued to impact our claims expense. We also continue to expect and account for an inevitable "catch-up" in deferred treatment now estimated at $59.2 million.

What's next for NIB?

Looking ahead, NIB expects market conditions for the second half to remain similar to H1 FY22. Heightened awareness of health risks from COVID-19 have become paramount among policyholders.

Ahri's policyholder is expected to lift roughly 3% with the launch of new product concepts.

The near-term outlook for the iihi and travel businesses is expected to gradually return as countries re-open international borders. Both segments are forecasted to become profitable in FY23.

In addition, New Zealand net policyholder growth is estimated to reach between 3% to 5%.

Nonetheless, given the unpredictable nature of COVID-19, NIB refrained from providing an earnings guidance for the FY22 period.

However, Mark Fitzgibbon did say, "We see a real opportunity to outpace the market in the six months ahead with some exciting initiatives underway including our brand re-fresh, new product concepts, additional distribution partnerships and increased investment in marketing".

Motley Fool contributor Aaron Teboneras owns NIB Holdings Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended NIB Holdings Limited. 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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