Rising claims hit profits
Nib pays price of ageing, healthcare costs
AGEING Australia’s steadily rising rate and cost of health insurance claims is expected to weigh on earnings growth for health insurer nib in the current year, along with investments in new ventures and technology.
Nib managing director Mark Fitzgibbon says insurance claims are starting to drift higher after a prolonged period of relatively low growth, and that will affect profitability in 2017/18.
“Essentially, Australians are demanding more and more healthcare for all the reasons we understand such as an ageing population,” Mr Fitzgibbon said during a full-year results briefing yesterday.
“The outlook for claims inflation and premium pricing, as well as the investments we’re making in long-term growth across the group, means in FY18 we don’t anticipate earnings accretion like we’ve become accustomed.”
Mr Fitzgibbon also said growth in the health insurance business for Australian residents was weak – a factor unlikely to change in the short term unless economic conditions pick up.
Mr Fitzgibbon said profit margins within Nib’s core Australian Residents Health Insurance business would likely return to being within the range of 5 per cent to 6 per cent.
The company expects underlying operating profit to be at least $150 million in fiscal 2018, compared to $153.7 million in fiscal 2017. Nib managing director Mark Fitzgibbon says insurance claims are starting to drift higher
Nib is also considering a collaboration with Chinese pharmaceutical firm Tasly to sell “critical illness” lump-sum insurance in the Jing-Jin-Ji area in China, which includes Beijing.
Critical illness insurance comprises more than 90 per cent of the individual health insurance market in China.
Nib’s reported net profit for the year to June 30 lifted 29 per cent to $119.6 million, helped by an increase in policyholder numbers and lower-than-expected claims expense.
The company also generated revenue of more than $2 billion for the first time, with premium revenue in the ARHI business up 6.4 per cent to $1.7 billion.
Claims growth in the ARHI business was lower than anticipated, up 5 per cent to $1.4 billion.