nib raises guidance on 'benign claims environment'

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nib (ASX:NHF) has raised its guidance for the current financial year saying it now expects to report underlying of profit of at least $190 million.

The company, which previously issued guidance of at least $180 million, said the new guidance will include operating profit of at least $168 million. 

According to nib managing director, Mark Fitzgibbon, the improved earnings outlook was primarily driven by a prolonged benign claims environment, especially in its Australian residents health insurance business (arhi).

“Across the industry for the past year or so we’ve seen claims utilisation at historic low levels. While it’s hard to single out the main driver, there’s no doubt macro factors such as negligible wage growth are having an impact in terms of industry participation, as well as the rate our members are seeking medical treatment," said Mr Fitzgibbon.

“Our own efforts to address affordability is also helping bend the claims curve through tighter cost containment, expansion of our provider networks, as well as passing on in full to our members the savings from the price reductions in medical devices.”

According to Mr Fitzgibbon, nib's previous guidance had assumed a slight reversion in claims utilisation during this financial year.

"We just haven't seen the activity we originally forecast for the start of the year. Our previous guidance assumed arhi net margin to be at the upper end of our 5% to 6% target range, whereas we are now expecting FY19 net margin to be similar to FY18.

"We're committed as ever to make private health insurance more affordable and the current claims environment will undoubtedly flow through to benefit members through the setting of premiums," added Mr Fitzgibbon.