Nib's NZ first-half earnings eroded by premium payback product, premiums rise

Monday 23rd February 2015

Nib Holdings' New Zealand unit posted a 76 percent drop in first half earnings as it recognised the liability of its premium payback product, even as premium revenue rose from a year earlier.

New Zealand operating profit fell to A$763,000 in the six months ended Dec. 31, from A$3.21 million a year earlier, the Sydney based insurer said in a statement. That was largely due to a A$3.3 million charge in its premium payback liability, a product that reimburses policyholders the difference between premiums received and claims paid.

"The products this liability relates to are closed and the liability is matched by a specific investment portfolio which results in the majority of the movement in the liability being offset by investment income," Nib said. "It's still very early days for our New Zealand business and it's going to take a little time to build it to the level we aspire."

Stripping out the liability, Nib's New Zealand operating profit rose to A$1.3 million, compared to A$500,000 a year earlier. Net premium revenue gained 8.1 percent to A$72.9 million, accounting for about 9.1 percent of the group's A$802.3 million in premium revenue. Nib Holdings lifted net profit 4 percent to A$41.4 million in the half, with the board declaring an interim dividend of 5.5 Australian cents per share, payable on April 2 with a March 6 record date.

Nib bought Tower Medical Insurance in November 2012 for $102 million, and launched Nib New Zealand in October 2013.

The New Zealand unit had 81,735 policyholders as at Dec. 31, up from 79,147 six months earlier.

The ASX listed shares fell 2.3 percent to A$3.585, and have gained 17 percent this year. The stock is rated an average 'hold' based on 11 analyst recommendations compiled by Reuters, with a median target price of A$3.30.

BusinessDesk.co.nz

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