Australia Markets open in 4 hrs 57 mins

NIB lifts profit, flags affordability hit

Alex Druce
NIB has boosted its payout to shareholders after a 13 per cent increase in full-year profit

NIB says private health insurers are feeling the pressure from cost-conscious consumers even as it increased its shareholder payout on the back of a 13 per cent rise in full-year profit.

The insurer on Monday reported net profit of $149.8 million as net premium revenue for the 12 months to June 30 increased 8.2 per cent to $2.34 billion.

NIB hiked its final dividend from 11 cents per share to 13 cents per share despite flagging increased cost-of-living pressures and again suggesting the sector was bearing a disproportionate load when it comes to healthcare.

Chairman Steve Crane said private insurance was increasingly leant upon for healthcare funding and treatment, and was not immune to the affordability challenges facing many households.

"And there's no shortage of political and media commentary taking a swipe at our industry for not doing enough," Mr Crane said in NIB's annual report on Monday.

"We agree that there is more to be done to improve affordability, increase transparency and reduce unnecessary cost ... to help curb rising premiums, significant out-of-pocket expenses and a diminishing value proposition for members."

Total claims paid during the year increased by 6.9 per cent to $1.8 billion, while underlying operating expenses rose 15 per cent to $407.4 million on growth and expansion initiatives, higher employee and IT costs, and the acquisition of the QBE Travel business.

Managing director Mark Fitzgibbon conceded a 2.1 per cent increase in net policyholders for FY19 was "not a big number", though likely to contrast with an "expected decline in hospital coverage across the industry as a whole".

Nonetheless, Mr Fitzgibbon said it had been a generally strong performance for NIB despite a year of "challenging market conditions".

"On the back of actual claims growth, premiums continue to rise while household disposable incomes remain static and competition for discretionary consumer spending fierce," Mr Fitzgibbon said.

He said further turbulence had been generated by an expected change of federal government in May, with investor confidence "at an all-time low" in the face of a legislated two-year cap on premiums.

"It's now history that the threat passed with the re-election of a coalition government but it served to reinforce just how vital it is for the industry to have a stronger voice in healthcare policy and work even harder at keeping premium growth as low as possible," Mr Fitzgibbon said.

Mr Fitzgibbon last month suggested the government should make private health insurance compulsory - and pay the premiums of those who can't afford them.

On Monday, he reiterated healthcare spending was generally expanding at "twice the rate of GDP" across countries in the Organisation for Economic Co-operation and Development.

"We'll need more private funding and delivery to relieve pressure on public financing," he said.

The company will pay a fully franked final dividend of 13 cents per share for a full-year payout of 23.0 cents.

NIB said its FY19 insurance margin of 7.3 per cent was likely to normalise towards longer-term averages of 5.0 per cent to 6.0 per cent, while it forecast an operating profit of at least $180 million in FY20.

Operating profit in FY19 was $184.6 million.

Shares in NIB fell by 5.37 per cent to a more than two-month low of $7.22 by 1345 AEST.

NIB BOOSTS PROFIT, DIVIDEND

* Net profit up 13pct to $149.8m

* Net premium revenue up 8.2pct to $2.34b

* Final dividend 13.0 cents per share, fully franked, up from 11.0 cents.