Nib Holdings (NHF)
BUY

Premium rises in the waiting room

 28 Jun 2023
Sector: Financials

PREMIUM RISE DEFERRAL + TRADING UPDATE

Need To Know

  • Nib announce a 2.72% premium rise, the second lowest in 20 years, set to take effect on 1 October 2023, delayed from 1 April 2023
  • Deferral brings nib’s Covid-19 support package to ~$181m since March 2020. The 6-month deferral reflects $35m in claims savings
  • The group continues to take market share with givebacks likely assisting customer retention. Resident policy numbers are up 4.7% to March 2023, tracking towards the top end of guidance of 4-5% (compared to 2.0% industry growth)

The additional 1-month delay in price rises, (initially from 1 April to then 1 September and now 1 October) is likely to create a positive feedback loop between givebacks and policyholder growth. We expect that the deferral demonstrates further permanent claims savings, and hospital claims remain below pre-Covid levels. Ancillary claims are ‘returning to normal’ however we still believe nib can earn above-market margins. March APRA data also demonstrates the overall industry’s continued strong profitability.

Investment View

Nib offers valuable exposure to the PHI industry as well as the growing NDIS. It has grown significantly over time, taking market share both organically and through acquisitions. Nib has consistently grown its premiums and policyholders above the industry, and we expect this trend to continue. In 2022, nib boasted one of the highest net margins of 14%, well above the industry average of 7%. Whilst we expect this to gradually return to the long-term average of 6-7%, the current high margins are being converted into significant balance sheet strength. We retain our Buy recommendation. 

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Stock Overview

Share Price

Company Overview

Nib is Australia’s 4th largest private health insurer, covering over 1.7m people across Australia and New Zealand.

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