What: Health insurance group NIB Holdings Limited (ASX: NHF) shares have appreciated 6 cents or 1.8% today on the back of a mixed full-year results presentation and the announcement of a special dividend distribution.
With shares now trading at $3.36, they have climbed a remarkable 59% over the last 12 months, which compares to the 10% rise of the benchmark S&P/ASX 200 (INDEXASX: XJO) Index.
So What: Overall, it was quite a pleasing result for NIB. The company managed to grow its customer base while its core Australian resident health insurance business (arhi) enjoyed premium growth of 10.7% and its highest sales growth in more than a decade. Meanwhile, net profit after tax (NPAT) grew 3.9% to $69.8 million which was bolstered by a 15.6% rise in premium revenue to $1.5 billion. The group's overall operating profit, which excludes net investment income, also grew by 4.3% to $72.3 million.
These results allowed the company to announce a special dividend of 9 cents per share, fully franked, while its ordinary full-year dividend was raised 10% to 11 cents per share, also fully franked. Earnings per share (EPS) rose 3.9% for the year to 15.9 cents.
However, the news wasn't all positive. NIB's overall result was impacted by a 12% rise in arhi claims which ballooned out to $1.2 billion for the year. Particularly damaging was an 8.3% rise in public hospital claims and a 12.6% rise in prosthetic claims. As well as a rise in risk equalisation, which increased by 13.8% to $190.6 million.
These inflated medical claims caused the operating profit of the arhi, which accounts for 79% of the company, to fall to $57 million from $59 million the year before. The company's net underwriting margin also fell to just 4.2%, which is well below NIB's targeted range of between 5.0% and 5.5%.
Now What: Pleasingly, the company expects the Australian business to improve and grow in FY15. NIB expects to announce a consolidated operating profit in the range of $75 million to $82 million, implying an increase of between 3.7% and 13.4% for FY15.
A better bet than NIB Holdings
NIB Holdings is a high-quality business with a promising future ahead of it. However, trading on a price-earnings multiple of 20.3, it no longer appears to be trading under the market's radar.
