NIB Result Highlights Testing Times for Private Healthcare

Narrow-moat NIB’s first-half fiscal 2020 NPAT slumped 23% to AUD 57.1 million, and while a little weaker than expected, we don’t think it is cause for alarm. Movements in claims reserves, which boosted profits in the previous corresponding period, detracted from profits this half. Based on actual claims, the underlying operating profit result is down a less abrasive 2%. The net margin for the Australian private health insurance division fell to 5.9% from 8.7% last year, or adjusted for the reserve releases was down marginally to 6.4%. Given the insurer targets around 6%, in our view, this result is more a regression to normal levels of profitability.