EM – FY21 report: NIB (ASX: NHF) share price falls

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The share price of NIB Holdings Limited (ASX: NHF) fell 10% after the private health insurer released its results for fiscal year 21.

NIB reported that the underlying total sales were up 2.9 %, to $ 2.6 billion, with total claims expense increasing more slowly, increasing 2.5% to $ 2 billion.

The company’s adjusted operating profit increased 39.5% to 204.9 Million dollars. It generated net income of $ 160.5 million after tax (NPAT), which benefited from net investment income of $ 51.8 million. This increased the statutory earnings / earnings per share (EPS) by 82.4% to 35.2 cents.

The management board of NIB decided to resolve a final dividend of 14 cents per share, which increases the dividend for the full year increased to 24 cents per share. That’s a 71.4% increase over FY20.

NIB said it expects market conditions in FY22 to be similar to the previous 12 months, with the pandemic having mixed consequences.

Management warned anticipate that COVID-19 will encourage private health insurance participation across Australia and New Zealand, although the economic impact of lockdowns is a negative growth factor.

NIB expects net growth in Australian-based health insurers to be between 2 and 3% and that New Zealand’s business will grow in line with recent years.

The outlook for some of its other businesses, such as B. Travel, however, remains challenged by the ongoing effects of COVID-19.

The health insurer also noted that if lockdowns persist, there will be fewer medical treatments of all kinds. But it is “impossible” to accurately predict the impact in FY22 and beyond.

Management is confident about policyholder growth, productivity gains and prices that will help NIB achieve its profit targets.

NIB also noted that through its joint venture with Tasly, it now has a license to distribute health insurance in China and made initial sales in July. The business is not expected to be profitable in the next year or two. However, management believes the long-term opportunities are substantial.

NIB stock has outperformed, but it’s hard to say what is good value over the medium term in these unprecedented times. But I’d prefer Medibank Private Limited (ASX: MPL).

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