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A Newcastle-based health insurer has reported a modest increase in its annual profit, thanks to the higher-than-expected profitability of its Australian business.
nib’s revenue for the 2018 financial year was up by 11.1% to $133.5 million, aided by the company’s 6.9% net margin for its Australian health insurance business, plus last year’s acquisition of corporate health insurer GU Health, which lifted nib’s total revenue by 12.1% within Australia to $1.87 billion.
“Our core arhi business once again grew organically at a rate well ahead of the industry average and we welcomed the GU business,” said Mark Fitzgibbon, NIB’s managing director. “Our net policyholder growth excluding GU was 3.0% compared to an industry average of 0.5%, with the GU business adding approximately an additional 29,000 policyholders for the year. And while in arhi we paid 4.0% more in claims compared to FY17, our net margin grew 50bps to 6.9%.”
Fitzgibbon said the 6.9% net margin for its Australian health insurance business was higher than the company target and reflected lower-than-expected claims growth.
“As we reported in last week’s market update, nib and private health insurers generally are currently experiencing historically low levels of claims inflation,” Fitzgibbon said, adding that the welcome development was driven, in part, by cheaper prosthetics.
“Prosthetic savings were passed on in full to members with our average premium increase of 3.93% this year our lowest increase in 15 years,” he said.
Meanwhile, nib’s adjacent businesses, including travel insurance, international workers’ and students’ health insurance, and its NZ operations, also saw increased earnings, with underlying operating profit growing by 8.3% to $61.1 million.
Fitzgibbon said nib’s adjacent businesses “accounted for almost 30% of our group earnings this year and highlights the success in leveraging key capabilities and skills across the nib Group to grow and diversify our earnings profile.”
nib said it is targeting a 3% to 4% annual organic growth, but expects net margin contraction from 6.9% in FY18 towards the top end of its target range of 5% to 6% in FY19. The insurer cited macroeconomic factors including affordability and negligible growth in discretionary spending for the modest growth prospects.
