nib full-year result 'blurred' by the impact of COVID-19

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nib has announced its full-year 2020 results with managing director Mark Fitzgibbon saying the COVID-19 pandemic "blurred" what was otherwise a good performance.

“So far, we’ve navigated the COVID-19 crisis well with the nib Group in very good shape and well positioned to meet a range of future scenarios,” said Mr Fitzgibbon.

“At the centre of our efforts has been our members, employees and the community in which we operate with our COVID-19 support package to date valued at more than $45 million.

“This includes a range of measures, such as the six month postponement of approved premium increases, waivers and suspensions for financial hardship, and expanded cover for COVID-19 related treatment, at no additional cost to members. And today we’ve announced we’re extending this support to waive the 1 October 2020 premium increase for six months for arhi members on JobSeeker and JobKeeper.”

Mr Fitzgibbon continued, “We’ve also provided $1.5 million in funding for community and clinical initiatives, including donating 100,000 face masks to healthcare workers and $500,000 to support Lifeline’s crisis counselling service.”

Mr Fitzgibbon said the full-year Underlying Operating Profit of $150.1 million is "on the surface disappointing" but it does accommodate a provision for deferred claims of $98.8 million. The insurer said these are claims it estimates were delayed as a result of COVID-19.

“We expect over the course of FY21, this provision will unwind as our members receive treatment they delayed during FY20. We’ve done the best we can to estimate the “catch up” but only time will tell just how much we’ll experience,” he said.

Mr Fitzgibbon said a "softer" profit result, combined with volatile equity markets, significantly impacted investment income - down 54 per cent to $16.6 million - with net profit after tax down 40.3 per cent to $89.2 million.

The full-year dividend is 14 cents per share. “In arriving at the final dividend, the Board closely considered a number of scenarios and the Group’s capital position. Acknowledging ongoing COVID-19 uncertainty and shareholder expectations we believe the final dividend constitutes a prudent and balanced position,” said Mr Fitzgibbon.

The company's Australian health insurance business reported a 2.9 per cent increase in premium revenue to $2.1 billion. It said the underlying profit of $133.6 million represented a net profit margin of 6.4 per cent, ahead of its internal target.

“In what are almost unprecedented economic headwinds, we grew policyholders by 1.9%, well ahead of 0.4% for the industry. We actually accounted for more than 41% of total industry growth for the year. Our thinking is that the pandemic has heightened community awareness of the risk of disease, the need for protection and the valued role private health insurance plays,” said Mr Fitzgibbon.

“We’ve also helped more than 9,000 of our arhi [Australian resident health insurance] members in financial hardship in the form of cover suspensions and waivers. Pleasingly, the experience so far is that the significant majority of these members are electing to resume their policy.”

Mr Fitzgibbon continued, “COVID-19 aside, well-known factors such as an ageing population, our ever-increasing appetite for healthcare, new technologies and the loss of younger insured members are placing huge pressure on claims costs. At the same time there are regulatory and affordability pressures that won’t go away.

“It all means we just have to become all the more creative in improving the value proposition for consumers, helping our members manage the risk of disease and reducing cost. And we’re making good progress.

“For example, initiatives such as our Clinical Partners program guarantees members have no out-of-pocket costs for knee and hip replacement surgery. Our 'Honeysuckle Health' joint venture with Cigna means members can look forward to a future in which health related behaviour and choices are more reliably informed by personalised data science and insight.”

Mr Fitzgibbon said the company's other businesses delivered "mixed results", with a strong performance from its new Zealand operations, reporting an 18.2 per cent increase in revenue to $23.4 million.

“An abrupt slowdown in Australia’s international student and workers intake due to COVID-19 border restrictions meant our international inbound health insurance (iihi) business did not contribute as much as expected to FY20 Group earnings, with UOP of $22.2 million down 36.4%,” said Mr Fitzgibbon.

“While growth eased during the year, the iihi business still delivered net policyholder growth of 6.3% surpassing 200,000 persons covered. And we have every confidence the business will bounce back once the pandemic passes or we will adapt.”

nib said its travel insurance business was "significantly impacted by COVID-19", reporting a loss of $19.7 million.

“Without question global and domestic leisure travel has been one of the sectors hardest hit by the coronavirus. Our focus remains on reducing operational expenses with an expected prolonged downturn in travel assumed,” said Mr Fitzgibbon.

The company said it continues to target net organic policyholder growth of 2-3 per cent in its Australian health insurance business. It said the sector outlook in New Zealand is similar.

 “COVID-19 remains a confounding factor in our planning and forecasting. It’s implication for sales, claims, expenses, investment income and earnings is enormous. Nevertheless, we have cause to have confidence in our arhi and New Zealand businesses and we’re adjusting strategy in other parts of the Group to adapt to current circumstances,” added Mr Fitzgibbon.