NIB share price tumbles 10% despite higher profit and bolstered dividend

The insurance giant's first-half earnings appear to have disappointed the market.

Key points
  • The NIB share price is suffering on Monday, falling more than 10% to trade at $7.12 at the time of writing
  • It comes as the health insurer posted a 13% jump in post-tax profits and a 20 cent interim dividend
  • Though it refused to provide guidance, citing ongoing COVID-19 impacts and uncertainty 

The NIB Holdings Limited (ASX: NHF) share price is plummeting as the market digests the health insurance provider's first-half earnings.

Right now, the S&P/ASX 200 Index (ASX: XJO) stock is down 10.33%, trading at $7.12 a share.

NIB share price tumbles on first-half results

Here are the highlights of the company's half-year report:

  • $91.6 million of net profit after tax (NPAT) – up 12.8% on the prior comparable period's (pcp)
  • Underlying operating profit lifted 13.3% to $125.1 million
  • $1.5 billion of revenue – a 9.3% jump
  • 20 cents of earnings per share (EPS) – up 12.4%
  • Claims expense came to $1.1 billion – up 4.9%
  • 13 cent per share fully franked interim dividend declared – 18.2% higher than the pcp's 11 cent offering

All of the company's major businesses performed well last half, with strong results from the Australian Residents Health Insurance (arhi) and New Zealand businesses. NIB also saw a recovery in its International Inbound Health Insurance (iihi) business and its travel insurance leg.

Policyholder growth across arhi, iihi, and the New Zealand business saw health insurance premium revenue lift 5.8% to $1.4 billion and contributed to higher net claims expenses.

Finally, the company said its investment income improved – coming in 47% higher at $22.2 million – but markets have been "fickle".

What else happened last half?

Effects from the pandemic lingered last half, driving arhi's net margin down to 8.6%. Though, that's higher than the company's 6% to 7% target.

That led the company to post its second-lowest premium increase in 20 years – 2.72%.

It also raised $158 million to fund its entry into the National Disability Insurance Scheme (NDIS), purchased plan manager Maple Plan, and launched its Thrive NDIS business.

What did management say?

NIB CEO and managing director Mark Fitzgibbon commented on the results weighing on the insurer's share price today, saying:

There's a symmetry returning to the businesses and profitability, after a period of COVID-led disruption. The half-year has set us up for a good full-year result and longer-term outlook.

Market and business conditions look favourable for our strategy and we've definitely got an appetite to invest across the group.

Yet inflation, rising interest rates, and slowing economic growth suggest some level of caution is required. Claims are still lower than we'd expected and at some point, volumes will lift.

What's next?

"No one is happy about the difficulties we see in the public healthcare system, but those issues will continue to render private health insurance more attractive to consumers," Fitzgibbon continued.

Despite that positive indication, NIB hasn't reinstated financial guidance, citing remaining COVID-19 consequences and uncertainty.

NIB share price snapshot

Today's tumble sees the NIB share price in the year-to-date red. But looking longer-term, the stock has been outperforming.

It's currently 8% lower than it was at the start of 2023 and 6% higher than it was this time last year.

For comparison, the ASX 200 has gained 6% year to date and 2% over the last 12 months.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. 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. 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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