The NIB Holdings Limited (ASX: NHF) share price has risen by 25% over the last year.
NIB is one of the largest private health insurers in Australia and revealed the following results earlier this week:
- Total underlying revenue up 7%
- Underlying operating profit up 16.4%
- Net profit after tax up 30.9%
- Underlying earnings per share up 21%
- Statutory earnings per share up 28.3%
- Policyholder growth of 3.8%
Most companies on the ASX would be happy with this set of results, but the NIB share price is down by 5% since the report.
NIB has impressively grown its number of policyholders each year and the company is taking most of the growth of the private health insurance sector. Its agreement with Qantas Airways Limited (ASX: QAN) is clearly working, among other strategies.
Health companies have long-term growth characteristics thanks to Australia's ageing demographics. Health insurance is good in-particular because it gives investors exposure to all types of medical conditions and illnesses.
NIB is working hard at negotiating prices with health providers such as Healthscope Ltd (ASX: HSO). This helps policyholders and improves NIB profit margins.
There is a lot of commentary surrounding the affordability of private health insurance. If policyholders start dropping off then NIB could be in trouble. However, this seems to be affecting competitors such as Medibank Private Ltd (ASX: MPL) more than NIB.
I think NIB's results were quite impressive, even if the growth numbers weren't as strong as previous years.
Is NIB a buy?
NIB is one of the best ways to play the ageing demographic tailwind in my opinion. NIB shares are currently trading at 21x FY17's earnings, which isn't too expensive.
The shares also come with a grossed-up dividend yield of 4.61%, this is quite attractive compared to other stocks which are also growing earnings per share at more than 20% a year.
