The COVID-19 pandemic has had a "malign" impact across the business of private health insurer nib (ASX:NHF), said the company announcing its half-year result.
The nib business is dominated by its Australian private health insurance operation. It also provides health insurance to international students in Australia, health insurance in New Zealand and travel insurance.
The company reported a 4.4 per cent increase in group underlying operating profit to $86.9 million for the six months to the end of December 2021.
The company reported $1.3 billion in group revenue, which was down 1.1 per cent, but its claims expense rose 0.9 per cent to $1 billion. Total group expenses were down 14.1 per cent to $172.1 million.
nib managing director and CEO, Mark Fitzgibbon, said the result was pleasing given all the challenges presented by COVID-19.
“COVID-19 has had many malign consequences across the nib Group. It’s caused needed clinical treatment for our members to be delayed, uncertain market conditions and totally disrupted parts of our business such as international workers, students and travel insurance.”
Mr Fitzgibbon said, “It’s especially necessitated us supporting members throughout the pandemic with premium relief and membership suspension options and expanded cover for COVID-19 related treatment. And we’ve leaned into various public health initiatives such as the procurement early in the pandemic of scarce surgical face masks for frontline healthcare workers and financial support for Lifeline. The cost of these combined initiatives totals more than $45 million so far.”
Mr Fitzgibbon said nib’s membership growth in its core Australian private health insurance business is expected to be ahead of the industry growth rate.
He said the company added more than 16,000 people to its private health insurance business for the six months to the end of December 2021 with premium revenue up 2.2 per cent to $1.1 billion.
“Of our growth, about 52% of policy sales were to members under the age of 40 with more than 45% of all sales new to private health insurance," said Mr Fitzgibbon.
"We’re also seeing welcomed improvement in member retention. Our experience helps counter all the negative talk about the value of private health insurance and COVID-19 has clearly raised people’s awareness about the risk of disease and the need for protection.”
He said the profitability of the company's Australian private health insurance business "has been slightly distorted by COVID-19 and consequential delays in treatment and claims which is still playing out. We’ve modelled that impact as best we can and continue to make allowance for a claims catch-up in our financial accounts.”
Mr Fitzgibbon continued, “Yet it’s an inexact science and while ever the pandemic persists, underlying claims costs trends will continue to have some noise, as we’ve seen with events such as the Victorian lockdowns. I also suspect there may be for many, a natural aversion to going to hospital and other forms of treatment involving close contact as a result of COVID-19.”
nib's private health insurance business in New Zealand reported membership growth of 2.6 per cent and premium growth of 6.6 per cent. Its underlying profit was broadly in line with the corresponding period last year.
The pandemic hit its Australian international students health insurance business with premium revenue down 5.2 per cent.
“Restrictions on inbound arrivals have been tough on business but also hard for our workers and students members with no ability to return home to visit family and friends," said Mr Fitzgibbon.
"Despite the restriction on foreign travel our international workers business is however actually holding up well. We’ve only shed 3.8% of its membership base, we have won some new business such as the Pacific Labour Scheme and Seasonal Workers Program and profitability remains solid. Yet our international students business isn’t doing as well. It has shed 7.3% of its membership base and is experiencing much higher claims,” he said.
nib Travel was hit hard by the pandemic with operating income down 90.8 per cent and an operating loss of $7.3 million.
“It’s all a bit gloomy at the moment yet COVID-19 will pass and our travel business is well-positioned for recovery and growth when travel restrictions are relaxed or borders re-open. The hiatus is actually providing us with an opportunity to recalibrate and modernise the business,” said Mr Fitzgibbon.
The company said it will not provide guidance for full-year 2021 "due to the continued uncertainty in the current COVID-19 environment in planning and forecasting across all its business operations."