Health insurer NIB has upgraded its profit guidance but says the health insurance market is enduring a tough time because of low wages growth and stiff competition.
NIB managing director Mark Fitzgibbon says the number of customers in NIB’s core Australian residents health insurance (ARHI) business grew by only 1.1 per cent in the first half of the financial year, down from growth of 2.1 per cent a year earlier.
However, the overall industry grew by only 0.3 per cent, and NIB accounted for about 36 per cent of that growth.
“It just highlights what a tough, soft market it is out there but how we continue to punch above our weight,” Mr Fitzgibbon said on Monday.
“Household incomes aren’t growing, and there’s no shortage of competition in the market place.”
NIB expects the number of its policyholders to rise by close to three per cent over the full year, less than the group’s four to five per cent target.
Mr Fitzgibbon said the entire system growth of about 60,000 policyholders in the past calendar year was low.
“I used to talk about system growing by between 150,000 and 200,000 widgets a year, so it’s a long way off that. But I am expecting some recovery in 2019 and 2020,” he said.
NIB on Monday reported a 0.3 per cent dip in net profit to $70.9 million for the six months to December 31, largely due to $3.6 million in costs associated with its $155.5 million purchase of corporate health insurer GU Health.
NIB’s underlying operating profit was up 1.3 per cent at $94.6 million.
GU Health contributed $28.4 million of revenue in two months.
Margins in the ARHI business contracted in the first half but NIB expects that full-year margins will finish at the higher end of the group’s target of five to six per cent.
Mr Fizgibbon said NIB’s non-ARHI businesses – which include international students and workers, travel insurer World Nomads, and NIB New Zealand – had a fantastic first half, generating more than 31 per cent of the group’s underlying profit.
Mr Fitzgibbon said growth in the non-ARHI businesses had been very important because it diversified the group and reduced the concentration of risk on the core ARHI business.
“We’re pleased with the results in adjacent businesses, and the board and the company has a large appetite to explore additional possibilities, and most importantly amplify our investment in these adjacencies that are going particularly well,” Mr Fitzgibbon said.
NIB raised its guidance for full-year underlying operating profit from $155 million to at least $165 million and expects an annual net profit of at least $148 million, up from $119.6 million in 2017.
Shares in NIB closed 17 cents, or 2.6 per cent, higher at $6.60.
NIB’S STEADY FIRST HALF
* Net profit down 0.3pct to $70.9m
* Net premium revenue up 8.6pct to $1.05 billion.
* Interim dividend up half a cent to nine cents, fully franked