NIB sharpens pen for acqusitions
Sydney Morning Herald
Tuesday February 23, 2010
THE private health insurer NIB will strive to secure a highly prized major acquisition this financial year or consider handing back its war chest of cash to shareholders next year.Having missed its two main targets, ahm and Manchester Unity, last year, NIB is still seeking a deal to transform its steadily improving bottom line.The insurer has about $160 million in cash, which, backed with debt, would make possible an acquisition along the lines of Manchester Unity and ahm, which cost their buyers, HCF and Medibank Private, $256 million and $367 million respectively.NIB also has 49 million shares available that remain unclaimed by 55,000 policyholders since its stockmarket listing in November 2007.The shares make up nearly 10 per cent of NIB's equity and will either be cancelled or sold after October, depending on the group's capital management plans at the time.Based on yesterday's closing price of $1.32, up 9.5c, the stock in question is worth nearly $65 million.Mark Fitzgibbon, NIB's managing director and a proponent of greater consolidation in the industry, said talks with a number of parties could result in the company making its first major purchase since floating.The board had recently decided to "give it another rev up in the next 12 months" but if no deal eventuated, a capital return would definitely be considered for June next year, Mr Fitzgibbon said.Market watchers said that if the entire sum was given to shareholders, it would be worth 35c a share. However, Mr Fitzgibbon would not say how much would be returned.The company's capital needs and lack of franking credits mean its latest interim dividend did not include an extra capital return. Last year's basic payout of 1c a share was topped up by 2c.Nevertheless, the half-year dividend rose by 1c to 2c a share because interim net earnings rose by $41 million to $43.1 million.Pretax underwriting profit rose 47 per cent to $30.5 million and investment returns recovered from a deficit of $14 million in the December 2008 half to a surplus of $33.6 million.NIB's insurance profit margin was struck at 6.8 per cent of premium revenue - itself up 9 per cent at $446 million - which was higher than its previous guidance of 5 to 5.5 per cent as a consequence of one-off lower insurance claims.This figure will drop back to its target range in the second half, but the company still expects a pre-tax profit contribution from its main business of $45 million to $50 million.
© 2010 Sydney Morning Herald