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  • Health insurance group nib (NHF) has decreased its profit guidance, claiming it’s largely due to an increase in claims
  • The company previously indicated that its 2020 financial year underlying operating profit would be at least $200 million but has now been changed to $170 million
  • In spite of this, nib’s travel International sales were up almost 13 per cent despite its domestic sales environment remaining tough
  • Following the news, nib’s share price fell 12.8 per cent with shares trading for $5.70 each

Health insurance group nib (NHF) has decreased its profit guidance by $30 million, largely due to an increase in claims.

The company previously indicated that its FY20 Group Underlying Operating Profit (UOP) would be $200 million but it now sits at $170 million.

However, full-year profit could be as low as $150 million compared to the previous guidances.

Managing Director Mark Fitzgibbon said these recent claims within nib’s Australian and New Zealand health insurance operations were starting to put pressure in in forces FY20 earnings.

“We’ve definitely seen a tick up in claims and while we did anticipate some level of claims inflation across the group in FY20, recent experience is that it’s been more widespread across a number of business line than we previously anticipated,” Mark said.

“Within our Australian residents health insurance (arhi) business claims inflation and utilisation continues to trend broadly in line with our expectations and we still expect the business to deliver a net margin of circa 6 per cent this year,” he added.

However, nib said its December 2019 quarter end data suggest higher industry claims is contributing to a great than originally forecast risk equalisation in the 2020 financial year, thus placing pressure on this year’s result.

Mark also noted that with further claims development relating to nib’s FY19 result, arhi’s FY19 net margin of 6.5 per cent, which was reported on in August, is now 6.2 per cent.

“Our adjacent businesses are also experiencing claims headwinds as well as a tougher operating environment,” Mark commented.

“While still very strong businesses, we’re expecting margins for each business line to revert closer to longer term sustainable levels going forward,” he said.

nib also said that while nib Travel’s international sales were up almost 13 per cent on last year, the domestic sales environment remained tough and has experienced some challenges.

However, the company is remaining confident about the outlook despite FY20 not looking as profitable as originally expected.

“The underlying commercial performance across our businesses is very good with attractive returns on invested capital and ongoing growth prospects,” Mark concluded.

nib will announce its FY20 half year results on February 24, 2020.

In light of this news, nib’s share price is currently down 12.8 per cent with shares trading for $5.70 each at 1:34 pm AEDT.

NHF by the numbers
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