Why did the NIB share price just hit a 3-year low?

Investors reacted negatively to an announcement from the private health insurer.

| More on:
private health insurance diagram.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The NIB Holdings Limited (ASX: NHF) share price fell to a three-and-a-half-year low after the company issued new guidance for FY25 on Tuesday.

The ASX financial stock opened 5% down at $5.70 per share.

It then embarked on a choppy journey and ultimately fell further to an intraday low of $5.58, a 7% decline from yesterday's closing price of $6.

And that was all in the first 90 minutes of trading.

But then the stock came full circle.

The NIB share price is currently trading at $6 and has fully recovered from this morning's volatility.

So, what caused all that?

Let's check out this FY25 guidance.

What shook the NIB share price on Tuesday?

NIB provided guidance for its FY25 underlying operating profit (UOP) of $235 million to $250 million.

This is lower than the UOP of $257.5 million in FY24 and $263.2 million in FY23.

The UOP guidance, coupled with a warning that the company currently expects a 1H FY25 operating loss, is likely to have caused investors anxiety this morning.

NIB's CEO and Managing Director, Mark Fitzgibbon, said "extraordinary growth" in New Zealand claims was already weighing heavily on the company's group performance for FY25.

So much so that management expects an operating loss of about A$10 million in 1H FY25.

Fitzgibbon explained:

High post-pandemic claims inflation is similarly impacting other private health insurers in New Zealand.

We expect conditions in New Zealand to improve in 2H25 with higher pricing, operating cost savings, and claims inflation moderating and for full-year profitability, albeit weaker than in FY24.

What else did the company say?

In today's statement on guidance, NIB reported that the flagship Australian Residents Health Insurance business, arhi, is growing strongly.

NIB said net policyholder growth for the first four months of FY25 was up 52.9% as of 31 October compared to the prior corresponding period (pcp).

This represents the strongest start to a new financial year for the arhi business since FY08.

Regarding arhi, Fitzgibbon said:

Currently our annualised growth rate of 3.2% is likely well ahead of average system growth.

We expect our net margin for the full financial year will be in the order of 6.0% – 7.0%, aligned with our target range.

At last week's annual general meeting, the company said it had 728,901 arhi policyholders as of 31 October, up 3.2% on the pcp.

There were also 221,368 iihi policyholders, up 10.8% pcp, and 164,094 New Zealand policyholders, up 0.8% pcp.

At the AGM, NIB chair David Gordon acknowledged the difficult economic times for customers.

The financial year 2024, particularly the second half, was a difficult period for our economies, for the
healthcare sector, and for our members and customers.

Inflation proved sticky, a troublesome scenario for Australia's Reserve Bank, which held interest
rates higher for longer than some of its offshore counterparts. Household budgets came under
pressure and, for much of the year, governments were looking for solutions.

We saw increased medical cost inflation, higher claims utilisation, and very public and intense
pressure from the private hospitals for greater remuneration.

Despite this, Gordon said the company had delivered "another strong result" in FY24.

Share price snapshot

The NIB share price has fallen 19% in the year to date.

This compares to an 8% increase in the S&P/ASX 200 Index (ASX: XJO) and a 29% uplift in the S&P/ASX 200 Financials Index (ASX: XFJ).

Created with Highcharts 11.4.3NIB Holdings PriceZoom1M3M6MYTD1Y5Y10YALL1 Jan 20241 May 2025Zoom ▾Jan '24Mar '24May '24Jul '24Sep '24Nov '24Jan '25Mar '25May '25Jan '24Jan '24May '24May '24Sep '24Sep '24Jan '25Jan '25www.fool.com.au

Should you invest $1,000 in Nib Holdings right now?

Before you buy Nib Holdings shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Nib Holdings wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended NIB Holdings. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Financial Shares

Nervous customer in discussions at a bank.
Financial Shares

Guess which ASX 200 bank stock just crashed 19% on shock news

Investors have been hitting the sell button in a panic this afternoon.

Read more »

Two CEOs shaking hands on a deal.
Financial Shares

This ASX 300 stock is jumping on surprise merger news

This stock could be having a very big makeover.

Read more »

Man smiling at a laptop because of a rising share price.
Financial Shares

How this quality ASX 200 stock is 'ideally placed' for years of growth

A leading expert expects more outperformance from this high-flying ASX 200 stock.

Read more »

Cheerful boyfriend showing mobile phone to girlfriend in dining room. They are spending leisure time together at home and planning their financial future.
Financial Shares

Looking for financial stocks outside the big 4 banks?

With the financial sector down to start the year, could these stocks provide upside?

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Financial Shares

This leading broker just upgraded AMP shares to 'outperform'. Here's why

This top broker just turned bullish on AMP shares. But why?

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Financial Shares

Up 53% in a year, why is this ASX 200 financial stock leaping higher again today?

Investors are sending the ASX 200 financial stock soaring on Wednesday. Let’s see why.

Read more »

Woman with an amazed expression has her hands and arms out with a laptop in front of her.
Financial Shares

Why this top broker just upgraded AMP shares

Let's see which broker has become bullish on the financial services company.

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Financial Shares

What's happening with the AMP share price on Thursday?

A lot of AMP shares are changing hands on Thursday. But at what price?

Read more »