nib upgrades on 'benign claims environment'

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nib has upgraded its profit forecast ahead of the announcement of its full-year result later this month.

According to the company, its operating profit for FY2018 will be approximately $184 million, up from its previous guidance of $165 million.

Managing director, Mark Fitzgibbon, attributed the upgrade to a "benign claims environment", especially in its Australian private health insurance business (arhi).

“Our previous guidance was premised upon an arhi net margin towards the upper end of our 5% to 6% target range but we now expect it to be closer to 6.9%, following completion of a one-month hindsight review of claims. Our international students and workers businesses have also exceeded our expectations,” said Mr Fitzgibbon.

Mr Fitzgibbon said there were several factors that explain the lower than expected claims inflation including tighter cost containment, price reductions in medical devices and some downgrading in cover.

He added broader economic conditions were also causing slower growth in the volume of medical, dental and other treatment.

Excluding the impact of the GU Health acquisition in October last year, the company said its Australian private health insurance business expects to pay $1.46 billion in claims in FY18, up 4 percent on the previous year notwithstanding net organic membership growth of 3 percent.

Mr Fitzgibbon said he hoped lower claims inflation reflected a new norm although inevitably a combination of an ageing population and future growth in household incomes would stoke higher growth in treatment volumes.

“Everyone shares the objective of making private health insurance more affordable and strains on the public health system mean we actually need greater market participation. We’re doing our very best and making good progress as evidenced by our 2018 premium increase of 3.95% being the lowest in 15 years,” he said.