NIB Holdings Ltd (ASX: NHF) shares have taken a recent hit and are down nearly 22% in the past month of trade.
Investors bailed out of the health insurer's shares last month despite the company's FY24 numbers, which saw revenues and profits up 9% and 67%, respectively.
NIB shares were also lower today amid a company response to a set of ASX queries. While the response was not price-sensitive, it did contain a number of important details.
Let's take a closer look.
NIB's detailed response to the ASX
The ASX's Aware segment contacted NIB's chief risk officer on 12 September with questions related to the company's profits and recent share price movements.
NIB's response to the ASX aimed to clarify these matters.
The health insurer emphasised its consistent messaging that private health insurance was a "relatively capital-light business" producing solid business returns.
It said its focus was on policy growth and maintaining a target margin of 6-7%. NIB also stated that its key business unit, Australian Residents Health Insurance (arhi), accounted for more than 78% of its revenue and 85% of its profits.
The ASX also asked whether NIB had published any earnings guidance and whether its FY24 results "differed materially from the market's expectations".
NIB noted its long-term view of the business versus providing short-term guidance:
Over the long term, NHF believes the two primary indicators of policy growth and target margin are key drivers of its share price. NHF does not provide earnings guidance, but provides an outlook around policy growth and target margin.
NHF considers that its reported measures of Underlying Operating Profit (UOP) and Net Profit After Tax (NPAT) are the primary measures of statutory and underlying earnings that the market focuses upon.
NHF, and the market, place particular importance on UOP as it is not impacted by one off costs nor investment income (which can be volatile), and as such is more reflective of the performance of the business.
The company also stated that its FY24 results marked its strongest since first listing in 2007. This could impact NIB shares.
Meanwhile, following its annual results, NIB was asked to address market feedback and analyst reports. Some analysts expressed concerns about policy growth, which was 2.5% for FY24.
However, the company had already mentioned in a previous announcement that it was off to a "record start in FY25."
Furthermore, it also announced the appointment of its new CEO, Mark Fitzgibbon, on 12 September.
It says these factors, combined with "media coverage on private hospital contracting," may have resulted in short-term volatility in NIB shares.
Is there an upside for NIB shares?
Despite the market's recent activity in NIB shares, management emphasised its focus on long-term value creation in its response to the ASX today.
The company highlighted that its internal financial estimates did not materially deviate from consensus expectations, with both UOP and NPAT within the range of analyst estimates.
NIB also noted it started the new financial year with a 42% increase in net policy growth.
On balance, analysts are bullish on NIB shares. Goldman Sachs recently reiterated its buy rating with a $6.60 price target.
It cited NIB's defensive position in the private health insurance sector, manageable claims environment, and policyholder growth that outpaces the industry.
Meanwhile, consensus rates the stock a buy as well, according to CommSec.
Foolish takeaway
NIB's response to the ASX sought to reassure investors (and the ASX itself) that it's focused on creating long-term value.
After spending today trading in the red, NIB shares closed 0.17% lower at $5.72. Shares are down 25.4% in the past 12 months.
