Nib Soars As Management Uplifted FY19 Earning Guidance

  • Oct 31, 2018 AEDT
  • Team Kalkine
Nib Soars As Management Uplifted FY19 Earning Guidance

Health insurer Nib Holdings surged up 6.334% on uplifted earnings guidance for Fiscal 2019. After going up by $0.330, nib’s stock price closed at $5.540 on the day of its Annual General Meeting, 31 October 2018.

Early this morning nib unveiled its upgraded FY19 guidance that now forecasts Group Underlying Operating Profit to reach at least $190 million on the back of Australian Residents Health Insurance(arhi) business. This reflects a $10 million increase on previous guidance of $180 million. Whereas Group Statutory Operating Profit is expected to be minimum $168 million, higher than the previous guidance of $159 million.

Nib’s Managing Director, Mark Fitzgibbon stated that the improved earnings outlook was primarily driven by a prolonged benign claims environment, especially in its Australian Residents Health Insurance (arhi) business. 

The management advised that improvement in FY19 guidance is in response to further development of nib's FY18 incurred claims for the 12-month period ended 30 June 2018 combined with ongoing low claims activity for the first quarter of FY19.

According to Mr. Fitzgibbon, nib's previous guidance had assumed a slight reversion in claims utilisation during this financial year. He stated that nib has just missed to see the activity the company has originally forecast for the start of the year. He added previous guidance assumed arhi net margin to be at the upper end of our 5% to 6% target range, whereas we are now expecting FY19 net margin to be similar to FY18.

The company has reportedly witnessed the claims utilisation at historically low levels over the past one year. Mr. Fitzgibbon said while it’s hard to single out the main driver, there’s no doubt macro factors such as ineligible wage growth is having an impact in terms of industry participation, as well as the rate the members are seeking for medical treatment.

Today, the company has also concluded its 2018 Annual General Meeting. The AGM presentation started from strong FY18 results that posted 11.5% growth in group’s underlying revenue of $2.2 billion, thereby delivering higher operating profit. It translates an underlying operating profit of $184.8 million, up 20.2% on FY17. The statutory net profit after tax was $133.5 million, up 11.1%, and statutory earnings per share was 29.4 cps, up 8% on pcp. During FY18 nib’s arhi business segment has contributed $130.7 million in group’s underlying operating profit, up 22.1% from prior year.

While in the voting round all the resolutions tabled in front of nib’s shareholders have won majority approval. It included the election of Ms Jacqueline Chow as a Non-Executive Director of the Company; approval of participation in Long-Term Incentive Plan, among others.

The company concluded to stay committed to make private health insurance more affordable while bending the claims curve through tighter cost containment, expansion of company’s provider networks, as well as passing on in full to their members the savings from the price reductions in medical devices.

The stock price of Nib Holdings limited (ASX: NHF) last traded at $5.540 on 31 October 2018 while its PE was 17.720 x with market capitalization of $2.37 billion. In the past one year the stock has witnessed a performance change of -17.43%.


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