nib Holdings (ASX: NHF) has delivered a mixed first-half result for FY25, with revenue rising but earnings taking a hit as margins normalise. The health insurer continues to outpace industry growth in policyholder numbers and is actively managing claims inflation while expanding key business areas.
Key Numbers at a Glance
- Revenue: $1.8 billion, up 7.7% from $1.7 billion in 1H24
- Underlying Operating Profit (UOP): $105.8 million, down 26.7% from $144.3 million
- Net Profit After Tax (NPAT): $82.9 million, down from $103.9 million
- Statutory EPS: 17.1 cps (1H24: 22.0 cps)
- Dividend: 13 cps, fully franked (1H24: 15 cps)
CEO Commentary
Group CEO Ed Close highlighted that while the dip in earnings was expected—following unusually high margins in 1H24—nib’s core business remains strong, particularly in Australian health insurance.
“Australian Residents Health Insurance (arhi) margins were at an unsustainably high 9.7% in 1H24 and have now normalised to 7.0%, which is within our long-term target range,” Close said.
Health Insurance Growth Defies Market Trends
Despite a challenging environment, arhi policyholder numbers increased by 3.3%, well above industry growth rates. nib attributed this to competitive pricing, strong corporate partnerships, and expanded product offerings, including its “Known Gap” and “No Gap” networks aimed at reducing out-of-pocket costs for members.
The international students and workers health insurance (iihi) segment also saw solid growth, with policyholder numbers up 10.6% and underlying profit increasing 11.2% to $12.9 million. However, the New Zealand business struggled, posting a $10.1 million loss amid high claims inflation, though December and January were profitable.
Other Business Segments
- Travel Insurance: UOP fell to $1.9 million (1H24: $4.1 million), though the US market is showing promise.
- NDIS (nib Thrive): Profits rose to $8.4 million as nib expanded its participant base.
- Health Services (Honeysuckle Health & Midnight Health): Losses narrowed to $5.3 million (1H24: $15.0 million), and a planned merger could accelerate profitability.
Outlook & Dividend
nib reaffirmed its FY25 UOP guidance of $235 million to $250 million, with growth expected in the second half as New Zealand returns to profitability and Australian health insurance remains strong.
The company will pay a 13-cent fully franked interim dividend on April 9, 2025, with an ex-dividend date of March 6, 2025.
Bottom Line
While earnings took a hit due to normalising margins and challenges in New Zealand, nib’s strong policyholder growth and cost control measures suggest it remains well-positioned for the long term. Investors will be watching closely to see if nib can sustain its market-beating membership growth and successfully navigate claims inflation in the coming months.
