The NIB Holdings Limited (ASX: NHF) share price is under the spotlight after announcing an acquisition in New Zealand.
NIB makes Kiwi Insurance acquisition play
NIB has announced that it’s going to buy Kiwi Insurance for a total cost of approximately $43 million, or NZ$45 million in New Zealand dollars.
What does it do?
It was established in 2002 and offers life and living insurance products and services through Kiwibank.
If the transaction is allowed by regulators to go ahead, when NIB buys the business it will also enter into an exclusive relationship with KiwiBank – another business owned by the seller (Kiwi Group Holdings) – which will see the bank refer its retail customers to NIB for their life and living insurance needs.
Why is NIB buying Kiwi Insurance?
NIB’s management said the acquisition was aligned with the company’s “personalisation” strategy and would allow NIB NZ to provide health insurance members and Kiwibank customers with a wider set of products relevant to its “your better health”.
The company had been looking at opportunities in New Zealand for some time and is very confident that a more comprehensive and integrated offering would increase its market share in both health and life products, whilst growing revenue. The local living insurance market is reportedly twice the size of the health insurance market and has achieved consistent growth over the last decade.
The NIB Managing Director Mark Fitzgibbon said:
“In New Zealand, living, life and health insurance are complementary products so often purchased as a package. We’re responding to this preference with what should be a more integrated and seamless experience for members and customers. And it means more people will benefit from the investment we’re making in more personalised health risk assessment and management.”
Summary thoughts on this deal and the NIB share price
NIB said it was going to fund the deal through a combination of existing capital and new debt. It’s expecting to add to profit per share, excluding one-off transaction costs, which are expected to be around NZ$8 million.
It seems like a smart bolt-on acquisition which will help diversify and improve the earnings in New Zealand.
With the NIB share price rising 60% over the last year, I’m not sure if it’s good value today or not after such a strong run. It’s hard to predict what’s going to happen in the private health insurance market in the longer-term, but this reduces NIB’s reliance a little on the Australian market.
