High level of dental claims put the bite on NIB profit

Australia's sole ASX-listed health insurer, NIB, has flagged year-to-June earnings will come in at the bottom end of the range previously signalled to the market because of a series of one-off factors.

Australia's sole ASX-listed health insurer, NIB, has flagged year-to-June earnings will come in at the bottom end of the range previously signalled to the market because of a series of one-off factors.

The pre-tax profit was earlier forecast to be between $75 million and $78 million. On Friday NIB told analysts the outcome would be "at the low end" of that range.

Premium income for the full year is forecast to be between $1.2 billion and $1.3 billion.

Pressuring earnings were higher than forecast dental claims, an "unsatisfactory" April 1, 2012, price rise of 5.5 per cent and a one-off state levy payment totalling $2.3 million.

Overall, NIB has forecast net policyholder growth for the full financial year of between 4 and 5 per cent.

NIB has been in the spotlight following its purchase of New Zealand-based Tower's health insurance arm last year for $81.3 million, amid concern it might have paid too much.

NIB had earlier tried to make a series of domestic acquisitions, with no success. In the year to June, NIB has forecast a $5 million to $7 million net underwriting profit contribution from the NZ operation.

Even though Tower NZ has 13.5 per cent of the local market, ranking it second behind the dominant insurer, the mutually owned Southern Cross, which has a 66 per cent market share, most of the remaining health insurers are subsidiaries of larger groups, such as the Commonwealth Bank, or are affiliated with local provident societies, which limits growth.

Equally important to lifting the contribution from New Zealand to NIB's near-term earnings prospects is stemming losses from its international student health insurance arm, which totalled $1.3 million last financial year. By the end of June, NIB estimates it will have 9000 international student policies in force, up nearly threefold over the past year.

"Strong policyholder sales volume means we are approaching critical mass for the business," it told analysts. It also said pricing in the sector was "becoming more rational" with new product designs helping to improve the claims experience.