The NIB Holdings Limited (ASX: NHF) share price has dropped more than 5% after the private health insurer released its FY20 report.
NIB’s FY20 report
NIB reported that its total revenue rose by 3.4% to $2.5 billion. However, the total claims expense, including the deferred claims provision went up 6.7% to $1.95 billion. Underwriting expenses fell 1.2% to $307.1 million.
The company said that COVID-19 is impacting claims and pricing. COVID-19 member and community support package has been valued at more than $45 million. Other impacts are hurting certain subsidiaries, particularly (and obviously) NIB Travel.
However, the company did see above industry average Australian resident health insurance (ARHI) policyholder growth of 1.9% compared to the industry of 0.4%.
The underwriting profit fell 11.4% to $180.7 million and the underlying operating profit dropped 25.6% to $150.1 million because other income dropped 22.2% and other expenses went up 10.7%.
The statutory operating profit fell 34.8% to $120.3 million due to one-off transactions including QBE Travel and GU Health integration ($9.3 million), business implementation costs and impairments of intangibles.
Profit before tax fell 41.3% with finance costs rising, and net investment income more than halving to $16.6 million. Net profit after tax (NPAT) dropped 40.3% to $89.2 million.
NIB dividend
The private health insurer’s board declared a final dividend of 4 cents per share, down from cents per share. That’s a big decline, but it’s good the company still decided to pay one. The board thought the payment amounted to a prudent and balanced position.
The full year dividend is 14 cents per share, down from 23 cents per share.
Management comments and outlook
NIB Managing Director Mark Fitzgibbon said: “So far, we’ve navigated the COVID-19 crisis well within the NIB Group in very good shape and well positioned to meet a range of future scenarios.
“COVID-19 remains a confounding factor in our planner and forecasting. It’s implication for sales, claims, expenses, investment income and earnings is enormous. Nevertheless, we have cause to have confidence in our ARHI and New Zealand businesses and we’re adjusting strategy in other parts of the Group to adapt to current circumstances.”
The health insurance business is still targeting net organic policyholder growth of 2% to 3%, though the company is wary about economic threats. Other businesses remain challenged but have good longer-term fundamentals, according to management.
NIB is facing a tough FY21. I’m sure many private healthcare businesses are hoping for an approved vaccine so that life can return somewhat to normal. It’s hard to say when NIB can return to growth because the healthcare side of things is unknowable. Perhaps it’s a long-term buy at today’s depressed price, but other ASX growth shares attract me more like Pushpay Holdings Ltd (ASX: PPH).
