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nib targets improved margins and volumes

AAP logoAAP 2/11/2016 Prashant Mehra

Health insurer nib has stepped up its targets for policyholder numbers, and anticipates fairly stable margins over the coming few years as its core business benefits from increased private healthcare spending.

The company has reaffirmed its profit forecast for the current financial year, despite challenging and highly competitive conditions in the health insurance market.

nib expects its statutory operating profit to rise to between $122 million and $132 million, up from $91.8 million in 2015/16.

The company has set a target of annual growth in policyholder volumes of four to five cent, and net underwriting margin growth of five to six per cent, over the next few years.

"This range is slightly higher than what we have previously aspired to deliver. However, we think it's a prudent long term target," chairman Steve Crane told the company's annual general meeting.

The company's core Australian Residents Health Insurance business continues to grow faster than the general market, he said.

At the same time, the company has benefited from a moderation in claims inflation from the six to seven per cent growth in recent years.

Claims inflation slowed to 2.9 per cent in 2015/16, driven by flat growth in costs for treatments and services and low growth in hospital utilisation. In the current year, nib is budgeting for inflation growth within a three to five per cent range.

Mr Crane said pressure on future insurance premiums would be relieved by the federal government's plans to lower the prices of some medical devices used in the private system.

However, more can be done to lower prices on prosthetic and medical devices, he said, adding that the insurer will pass on all savings through lower premiums as a result of the changes.

"We are reassuring investors in the market that the changes will be net positive," managing director Mark Fitzgibbon said.

NIB will soon lodge its submission to the health minister for next year's premium increase.

Shares in nib dropped 14 cents, or 2.9 per cent, to $4.62.

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