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Health premium hikes could slow, says nib

AAP logoAAP 21/08/2016 Trevor Chappell

Health insurer nib says the regular rise in insurance premiums could slow if a recent drop in hospital visits and treatment costs is maintained

nib has flagged the possibility of smaller premium increases after a lower lift in claims helped boost the company's full-year profit by 22 per cent .

Net profit for the 12 months to June 30 rose to $92.9 million, from $75.8 million a year earlier.

A slowdown in claims inflation, driven by flat growth in costs for treatments and services and low growth in hospital utilisation, lifted nib's gross margin from to 14.9 per cent, from 13.3 per cent.

"If this continues, we can look forward to lower premium increases than those of recent years when the combination of increasing treatment cost and the actual number of treatment episodes have driven claims inflation rates of between five per cent and seven per cent," nib managing director Mark Fitzgibbon said.

In 2015/16, nib's number of policyholders grew 3.8 per cent to nearly 727,000 - almost three times the industry average growth of 1.3 per cent - despite soft market conditions and tough competition. Policyholders were up 4.7 per cent in 2015.

Mr Fitzgibbon said all parts of nib's business grew in 2016 and improved their underlying profitability.

Although nib's Australian resident health insurance business was still growing, nib was at the same time decreasing its reliance on that business by expanding into other segments.

Those segments include World Nomads Group travel insurance, health insurance in New Zealand, and cover for international students and workers.

Those segments now accounted for almost 30 per cent of the group's earnings.

Mr Fitzgibbon said those businesses could contribute as much as 50 per cent to group earnings not too far down the track.

On the outlook for fiscal 2017, Mr Fitzgibbon said the health insurance market was still extremely soft and not a lot of growth was expected industry-wide.

Despite that prognosis, nib still hoped to achieve a growth rate of four to five per cent.

"That's a stretch target for us: four to five per cent policyholder growth, but we're up for it," Mr Fitzgibbon said.

Although there had been a drop-off in the past two to three years in the rate of hospital utilisation growth, there was evidence of a bounce-back.

nib shares lost 36 cents or 7.5 per cent on Monday, closing at $4.44.

LOW CLAIMS GROWTH BOOSTS NIB PROFIT

* Net profit up 22pct to $92.9m

* Premium revenue up 11.2pct to $1.82b

* Final dividend up 3.0 cents to 9.0 cents, fully franked

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