The NIB Holdings Limited (ASX: NHF) share price is down 10% after the private health insurer released its FY21 result.
NIB’s FY21 result
NIB reported that its total underlying revenue increased 2.9% to $2.6 billion, with the total claims expense rising slower, increasing by 2.5% to $2 billion.
However, its group expenses dropped 8.8% to $362.1 million.
The business saw its group underlying operating profit go up by 39.5% to $204.9 million. It generated $160.5 million of net profit after tax (NPAT) which benefited from net investment income of $51.8 million. This meant that statutory profit / earnings per share (EPS) increased by 82.4% to 35.2 cents.
Dividends
The board of NIB decided to declare a final dividend of 14 cents per share, bringing the full year dividend to 24 cents per share. That’s an increase of 71.4% compared to FY20.
Outlook for NIB and the share price
NIB said that it’s expecting market conditions in FY22 to be similar to the last 12 months, with the pandemic having mixed consequences.
Management warned that COVID-19 will encourage private health insurance participation throughout Australia and New Zealand, though the economic impact of lockdowns is a negative factor for growth.
NIB is expecting its Australian resident health insurance net policyholder growth to be in the range of 2% to 3% and for growth in its New Zealand business to be consistent with recent years.
However, the outlook for some of its other businesses, such as travel, remains challenged by the ongoing COVID-19 impacts.
The healthcare insurer also noted that there will be less healthcare treatment of all kinds as lockdowns persist. But it’s “impossible” to predict with any precision the implications in FY22 and beyond.
Management are confident about policyholder growth, productivity gains and pricing that will support NIB in achieving its profit targets.
NIB also pointed out that with its joint venture with Tasly, it now has a licence to sell health insurance in China and made its first sales in July. The business isn’t expected to be profitable for another year or two. But management believe the long-term opportunity is considerable.
The NIB share price has performed strongly, but it’s hard to say what good value is for the medium term in these unprecedented times. But I would prefer it to Medibank Private Limited (ASX: MPL).
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