NIB share price falls despite 19% profit growth in FY24 first-half result

NIB just revealed healthy profit growth.

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The NIB Holdings Limited (ASX: NHF) share price is down 2.2% at $8 in early trade after the ASX financial company reported its FY24 first-half result.

NIB share price falls after strong profit growth

  • Total revenue increased 12.4% to $1.7 billion
  • Underlying operating profit rose 21.7% to $144.4 million
  • Net investment income up 50% to $33.3 million
  • Net profit after tax (NPAT) up 19.4% to $104 million
  • Interim dividend boosted by 15.4% to 15 cents per share

The private health insurer revealed its Australian residents health insurance (ARHI) business was "materially assisted" by the favourable release of the liability for incurred but not yet paid claims at the end of FY23. The net profit margin was "strong" even after allowing for that.

However, NIB also said profitability was not recovering in its international students and travel businesses as quickly as management would like, though the trend was positive.

The company achieved 3.7% policyholder growth during the period. The FY24 first quarter was better than the overall industry achievement, but the second quarter slowed due to a price increase. NIB expects the first half's growth to be better as well.

Claims in the ARHI business were up 9.1%, driven by growth and the FY23 first-half COVID-19 savings being offset by favourable movement for liability for incurred claims from June 2023.

What else happened in the FY24 first half?

NIB's new National Disability Insurance Scheme (NDIS) business, called nib Thrive, now supports around 39,000 participants after acquiring six plan management businesses. nib Thrive contributed $6.4 million to first-half earnings. The NIB share price dropped 2.8% in December on the day it responded to the NDIS review report.

The company's joint venture Honeysuckle Health (with Cigna Corporation) has continued to see strong growth in the number of participants in its health and injury management programs and is reducing hospital admissions.

NIB majority-owned digital health business Midnight Health saw a 189.5% revenue increase year over year — NIB thinks this business can become a "very big enterprise."

What did NIB management say?

NIB chief executive officer Mark Fitzgibbon said:

The membership and revenue growth across all of our private health insurance businesses are testimony to the competitiveness of nib's products and pricing, especially at a time of growing cost-of-living pressures.

A few COVID-19 related factors continued to have some influence on profitability, but the underlying business is in great shape.

What's next for NIB?

The business maintained its guidance for FY24 of ARHI net policyholder growth of between 3% to 4%, commenting that it was cautious but optimistic about the broader conditions.

NIB's travel division launched a new white-label partnership with Woolworths Group Ltd (ASX: WOW) in December 2023.

NIB share price snapshot

Prior to today's movement, NIB shares had risen 9% over the past year, compared to a 5.8% rise for the S&P/ASX 200 Index (ASX: XJO).

Motley Fool contributor Tristan Harrison 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 positions in and 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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