Shareholders in NIB Holdings (ASX: NHF) were rubbing their hands with glee after the mid-cap stock’s share price jumped around 15% in morning trading following a better-than-expected 1H FY25 result.
The health insurer attributes the 8% rise in total group revenue to $1.8 billion to strong growth in NIB’s core business, private health insurance, and ongoing efforts to keep inflationary pressures and costs at bay.
While underlying operating profit fell 26.7% to $105.8 million, this was not unexpected due to unusually high margins in 1H FY24, plus a fall in NZ profit in 1H FY25 with the Kiwi economy suffering slow economic growth and industry-wide high inflation.
The insurer’s CEO Ed Close was quick to reassure the market that the private health insurer would finish the year strongly and that current operating margins had "returned to more sustainable levels, at 7%" this half.
Close confirmed the group’s underlying operating profit FY25 guidance at $235 million to $250 million and expects Australian Residents Health Insurance (ARHI) margins to remain at the "upper end" of its target range of 6-7%.
Other noteworthy 1H FY25 results announced today:
- Interim fully franked dividend of 13 cents per share (CPS) versus 15 cents in H1 FY24.
- Net profit after tax (NPAT) of $82.9 million, down from $103.9 million in H1 last year.
- Statutory earnings per share (EPS) of 17.1 cents, down from 22 cents in the previous half.
- ARHI policyholder growth of 3.3%.
- ARHI operating profits were down 21%.
- Travel insurance business, slight decrease in gross written premium (GWP) to $84.4 million.
- GWP growth picked up to about 11% as of Q2.
- Group operating expense ratio reduced 0.4% from 17.9% in 1H24.
- NIB NZ delivered an underlying operating loss of $10.1 million.
- NIB’s NDIS business, NIB Thrive, reported an underlying operating profit of $8.4 million, up from $6.4 million.
Looking forward
The group has expanded its Australia-wide medical services "Known Gap", and our "No Gap" dental network, and continues to invest in its payer-to-partner strategy, automation and digital health experiences.
Given that private health insurance remains an attractive proposition in the NZ market, the group has taken measures to get NZ back on track for 2H FY25, with December and January both profitable.
In 2H FY25 NIB will move to full ownership of Honeysuckle Health.
Honeysuckle Health and digital health company, Midnight Health intend to merge operations, under the leadership of Honeysuckle Health Chief Executive, Rhod McKensey.
Combined losses in those two businesses continue to reduce, to $5.3 million in 1H FY25 from $15.0 million in 1H FY24.
Honeysuckle Health is expected to breakeven in 4Q FY25, and Midnight Health in 4Q FY26.
“In 2H25 UOP is expected to be supported by a favourable working day impact, continued strong performance in arhi and iihi, and an expected return to full-year profitability in the New Zealand business,” said Close.
UBS concluded that NIB’s result was “overall, a better result than feared with good policy and more resilient margins in the key AHRI division.”
NIB Holdings has a market cap of $3.3 billion making it an ASX200 company; the stock’s share price is down 16% in one year and up 24% year to date.
The stock’s shares appear to be in a long-term bearish trend confirmed by a falling 200-day moving average. However, rallies occur in shorter timeframes.
Consensus is Moderate Buy.
This article does not constitute financial product advice. You should consider independent advice before making financial decisions.
