NIB keeps acquisitions piggy bank despite $75m payout
Sydney Morning Herald
Tuesday February 22, 2011
THE private health insurer NIB will retain a war chest of as much as $75 million to spend on acquisitions even after handing back the same amount to shareholders in a long-mooted return of surplus capital.Having failed in a $160 million bid for the mutually owned Geelong Medical and Hospital Benefits Association before Christmas, NIB has opted for a one-off payout of 16 a share as a pact with its investors if it couldn't secure a takeover.The $75 million capital return will be on top of a 4 a share interim dividend worth nearly $19 million, after it delivered half-year profits of $39 million for the six months to December 31, down 9.5 per cent.The fall in earnings was due to a 44 per cent drop in returns on NIB's cash and equity investments. These came in at $18.6 million against $33.6 million 12 months ago which, at the time, was a reflection of the recovery in financial markets following the global financial crisis.The higher interim dividend reflects growth of more than a third in pre-tax profits of nearly $41 million from its health insurance underwriting operations.That was struck on a $49 million increase in premium revenue to $495 million after NIB added another 10,847 policyholders, up 2.7 per cent, during the half, outstripping the industry's average growth rate of 1.7 per cent.NIB expects to add another 17,000 policyholders by the June year end, with its pre-tax underwriting profit slightly higher than originally forecast at $58 million.The proposed capital return will be voted on by shareholders in June. It will "make good" on NIB's promise to shareholders to return cash if a purchase of another fund didn't eventuate, the chief executive, Mark Fitzgibbon, said yesterday.NIB is looking at a couple of possible deals and will have $75 million available if one firms up. "However, the inertia [for consolidation] is very evident so for the time being it's best we move towards optimising our capital structure," Mr Fitzgibbon said.That could also include a special dividend payout next year and a continuation of its share buy-back plan, again depending on its acquisition plans. NIB's shares rose 8 to $1.41.
© 2011 Sydney Morning Herald