NIB's Positive Long-term Outlook Remains Despite Lowering Guidance

Narrow-moat Australian health insurer, NIB Holdings recently hosted an investor day, highlighting positive industry tailwinds and issues within the business, and providing a brief financial update. The company reaffirmed new regulatory standards have led to a surplus capital position. While the quantum of the surplus was previously expected to be in the range of AUD 30 to AUD 40 million, NIB increased its estimate to between AUD 50 and AUD 60 million. Of the surplus, AUD 40 million is expected to be available for distribution to shareholders through either a special dividend or a share buyback. Guidance for fiscal 2014 operating profit will be in the lower range of the previous guidance of AUD 73 to AUD 80 million. We've reduced our operating profit forecast to AUD 74 million, from AUD 81 million previously. Fiscal 2014 earnings per share falls to AUD 16.6 cents per share from AUD 17.8. We retain our AUD 3.50 fair value estimate and at current levels the stock is attractively priced.