Private health insurer nib NZ reverses decade of policy-holder decline

Monday 24th August 2015

Nib New Zealand, the local arm of the Australian private health insurer nib, has turned around more than a decade of policy-holder decline, growing customers by 5.9 percent to 83,775 in the 2015 financial year.

The Australian parent reported an 8 percent gain in net profit to A$75.3 million, or 17.3 cents per share, in the year ended June 30, as the insurer benefited from what it said was an inevitable funding shift from government to private sector health.

Nib New Zealand contributed A$7.3 million to the parent's operating profit, before including the impact of the premium payback portfolio which relates to a legacy product that is a calculated liability based on reimbursing policyholders at a future date, the difference between premiums paid and claims made. The New Zealand operations are the rebranded Tower medical insurance business bought in November 2012.

Despite being New Zealand’s second largest health insurer behind Southern Cross Medial Care Society, nib has only about 12 percent of the market. It sees opportunity to grow both its share and the overall pie given just 30 percent of Kiwis have private health insurance compared to 50 percent of Australians.

Managing director Mark Fitzgibbon said about half of the new policy growth in New Zealand came from its direct to consumer channel launched in 2013.

While the operating profit of A$5.4 million was on the surface slightly disappointing, it was hampered by the legacy product arrangement, he said.

“It’s clear we have some way to go yet to prove the New Zealand investment case, but we will,” he said.

Fitzgibbon said he expects profitability in New Zealand will improve this financial year, but will continue to be impacted for the short to medium term by investing in business development and further automation efficiencies.

“The thesis behind this level of investment is we will grow our share of the New Zealand health insurance market, as well as our overall profitability,” he said.

Group net premium revenue rose 9.6 percent to A$1.6 billion with its core Australian Residents Health Insurance business the star performer, accounting for nearly half of the total 54,233 policyholders added during the year. Nib said this represented growth of 4.7 percent for the company compared to industry growth of 2.5 percent.

Fitzgibbon said the Australian resident private health insurance market added another 158,000 policyholders in 2015.

“We expect it will continue to grow given favourable macro-economic conditions, low consumer confidence in the public hospital system, and on-going government policy support,” he said.

Nib plans to launch a new corporate product offering this financial year to tap into the group or employer-sponsored area of the New Zealand market.

It’s also exploring 'white-labelling' partnerships in New Zealand similar to ones that have proved successful in Australia, it said. White-labelling means insurance companies sell generally low-value products such as mobile phone insurance through unconventional channels such as large retail stores and supermarkets so they can attract customers they wouldn’t reach through their own distribution networks.

In addition, to third party distribution, nib New Zealand is also considering mergers and acquisitions here and further focus on its adviser channel.

The insurer declared a final dividend of 11.5 Australian cents per share, up from 11 cents last year.

It forecasts consolidated operating profit to be in a range of A$85 million to A$90 million in the 2016 financial year.

BusinessDesk.co.nz

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