NIB Holdings Ltd. engages in the provision of health and medical insurance. It operates through the following segments: Australian Residents Health Insurance, New Zealand Residents Health Insurance, International (Inbound) Health Insurance, and Travel.
Prior to this morning, NIB shares were trading at a 52-week high as NIB shares had surged over 60% in 2021 alone. However, on the back of their FY21 earnings announcement, NIB shares slumped today and was the worst performer among the ASX 200 stocks.
Why is NIB Share Price trading low?
In NIB Holdings results, the group’s underlying revenue grew by 2.9% to $2.6 billion and Group underlying operating profit (UOP) by 39.5% to $204.9 million. Net profit after tax (NPAT) of $160.5 million further benefited from net investment income of $51.8 million. Return on invested capital (ROIC) of 19.1% was similar to pre-pandemic levels. Among the highlights in the result was:
- Group underlying revenue $2.6 billion – up 2.9%
- Group claims expense $2.0 billion – up 2.5%
- Total Group expenses $362.1 million – down 8.8%
- Group UOP $204.9 million – up 39.5%
- NPAT $160.5 million – up 84.5%
- Statutory EPS 35.2 cents – up 82.4%
- Final dividend of 14 cents per share fully franked (up from 4 cents), with DRP available.
The NIB Managing Director, Mark Fitzgibbon said the extraordinary disruption of the pandemic didn’t prevent nib producing a strong result in FY21. In comparing FY21 with the previous financial year, Mr Fitzgibbon highlighted the impact of COVID-19 on relative claims, business activity and financial performance. “Neither FY21 or FY20 can be considered “normal” given fluctuation in healthcare utilisation and claims experience. A high level of provisioning in our accounts for deferred claims especially caused a substantial decline in FY20 UOP while our FY21 claims experience has turned out better than expected,” he said.
Nib expects market conditions for FY22 to remain similar to the past 12 months with the pandemic having mixed consequences. Nib said it expects arhi 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. The near-term outlook for the iihi and travel businesses is expected to be challenging due to restrictions on foreign entry and travel. Given the unpredictable nature of COVID-19, NIB refrained from providing an earnings guidance for the FY22 period and this looks to have been the main trigger for the weakness in the NIB share price.
Looking for best dividend stocks to invest on the ASX?
Get stock tips with our Market Experts. We help self-directed investors and self-managed super funds (SMSF) make smarter investment decisions and get better returns. Fill in your details and download your ‘Top 3 Income Stocks to buy in 2021’ Report instantly for free! Click here to download now!
