nib (ASX:NHF) has announced a strong financial performance for the financial year 2021 with increased revenue, earnings and investment income.
The company reported a 2.9 per cent rise in revenue to $2.6 billion with underlying profit up 39.5 per cent to $204.9 million.
Net profit after tax (NPAT) of $160.5 million significantly benefited from net investment income of $51.8 million.
Managing director Mark Fitzgibbon said the disruption of the pandemic did not prevent nib producing a strong result.
In comparing 2021 with the previous financial year, Mr Fitzgibbon highlighted the impact of COVID-19 on relative claims, business activity and financial performance.
“Neither FY21 or FY20 can be considered 'normal' given fluctuation in healthcare utilisation and claims experience. A high level of provisioning in our accounts for deferred claims especially caused a substantial decline in FY20 UOP [underlying operating profit] while our FY21 claims experience has turned out better than expected,” he said.
Mr Fitzgibbon said nib had introduced various measures to support members and the community throughout the pandemic.
“We’ve supported our members by postponing premium increases, providing premium waivers and suspension options, expanding cover for COVID-19 related treatment at no additional cost while also giving financial and in-kind support for many public health efforts. Together these initiatives account for over $45 million in value since the onset of the pandemic.
“Today we’re announcing the return to eligible members of $15 million in additional claims savings by way of an ex-gratia payment to be applied as an automatic adjustment to their next premium payment between the period 1 September and 31 December 2021,” he said.
Mr Fitzgibbon continued, “Our flagship Australian residents health insurance (arhi) business added over 26,000 policyholders representing a growth rate of 4.2%, above the industry average of 3.1%. Over the past five years, we’ve accounted for more than 20% of total industry growth. Similarly, New Zealand policyholders, excluding foreign students, increased by 5.0%, and has grown 50% since we acquired the business in 2012.
“The pandemic has clearly heightened people’s awareness of the risk of disease and the need for financial protection as well as timely access to treatment. This is reflected in our policyholder growth which has also benefited from improvement in retention and resumption of previously suspended policies.”
Mr Fitzgibbon said total benefits increased by 14.5 per cent across the group supported by a $64.83 million partial release of the COVID-19 provision established in the financial year 2020.
“While there was some catch-up of deferred treatment during the year it was less than initially anticipated. It is likely best explained by people’s ongoing fear of COVID-19 infection and continued lockdowns. While it remains difficult to forecast, we’ve retained a $34.0 million provision for further claims catch-up in relation to COVID-19,” he said.
Disruption to travel and restrictions on inbound arrivals continued to impact nib’s international inbound health insurance (iihi) and travel businesses. iihi membership was down 6.5 per cent while nib Travel sales revenue fell by 74.1 per cent.
“While it wasn’t positive for our iihi and travel businesses we’re confident they will bounce back postpandemic. Pre-pandemic in FY19, together these two businesses contributed $41.5 million to Group earnings compared with a loss of $19.5 million in FY21. It speaks of the opportunity ahead and we’re using the current hiatus to modernise our systems and improve operating efficiency,” he said.
The company said it expects market conditions in the current financial year (2022) to remain similar to the past 12 months with the pandemic having mixed consequences.
Mr Fitzgibbon said the ongoing COVID-19 threat will further encourage private health insurance participation throughout Australia and New Zealand although the economic impact of lockdowns on many households is a countervailing factor and a risk to growth.
The company said it expects arhi net policyholder growth to be in the range of 2 to 3 per cent and for growth in its New Zealand business to be consistent with recent years.
“The near-term outlook for our iihi and travel businesses remains challenged by restrictions on foreign entry and travel.
“It’s a small step, but through our joint venture with Tasly we now have a licence to sell health insurance in China and made our first sales in July. While the business won’t be profitable for another year or two, the medium to long term opportunity is considerable,” said Mr Fitzgibbon.
Mr Fitzgibbon added the trajectory of claims experience across its arhi, New Zealand and iihi businesses was equally difficult to forecast during the pandemic.
“There will be less healthcare treatment of all kinds so long as lockdowns persist, people continue to fear infection and social distancing reduces the incidence of other diseases. However, it is impossible to predict with any precision the implications for claims expense, so we remain cautious about forecasting insurance loss ratios for our businesses in FY22 and beyond. We will consider reinitiating earnings guidance as circumstances become clearer,” he said.