NIB hitting new highs as investors swirl
Health insurers have lodged price rise applications planned for next year. There is general optimism that the change of government federally will be good news for health funds, as funding constraints continue in the public health system.
Setting the scene for the share price rally was a recent move by the industry regulator, the Private Health Insurance Administrative Council, to relax capital standards within the sector. It has given the health insurers more control in deciding the amount of capital needed to make sure they can meet their obligations.
According to an estimate by Goldman Sachs, NIB has capital of $237 million, which is equal to two times its regulatory requirement.
Even though NIB's regulatory capital needs are expected to decline thanks to the rule change, it is far from clear whether the company will actually opt to hold less capital. NIB's capital buffer is already less than the industry average of three times.
Additionally, the insurer "could choose to retain excess capital to fund future growth initiatives, or as a bulwark against any adverse shifts in operating dynamics such as higher customer acquisition costs and/or increasing claims," Goldman Sachs noted. But at the same time, the move could open the door to a further capital return to shareholders, it noted.
The speculation on this front has come as broker Bell Potter raised the issue of takeover prospects for the health insurer, arguing that any of the industry leaders - bar perhaps Britain's BUPA - could acquire NIB without running into competition concerns.
Equally, the range of prospective bidders is not limited to competitors.
Frequently Asked Questions about this Article…
NIB Holdings' share price is hitting new highs due to speculation of a special dividend and takeover prospects, alongside the federal government's move to privatize Medibank Private.
The change in government is expected to be positive for health insurers like NIB, as it may alleviate funding constraints in the public health system, creating a more favorable environment for private health funds.
The Private Health Insurance Administrative Council has relaxed capital standards, allowing health insurers like NIB more control over their capital requirements, which could influence their financial strategies.
NIB Holdings has a capital of $237 million, which is twice its regulatory requirement, although this is below the industry average of three times.
Yes, the relaxed capital standards could allow NIB Holdings to return excess capital to shareholders, although they might also retain it for future growth or as a buffer against operational challenges.
There is speculation about takeover prospects for NIB Holdings, with broker Bell Potter suggesting that industry leaders, except perhaps Britain's BUPA, could acquire NIB without competition concerns.
NIB Holdings could use its excess capital to fund future growth initiatives or as a safeguard against potential increases in customer acquisition costs or claims.
The industry regulator, by relaxing capital standards, has given NIB Holdings more flexibility in managing its capital, which could influence decisions on capital retention or shareholder returns.
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