Nib In Talks With Smaller Funds

Sydney Morning Herald

Thursday February 28, 2008

Danny John

THE listed private health insurer NIB is engaged in early merger talks with two smaller funds as it prepares to face increased competition from the much larger rival that will be formed by the $2.4 billion partnership between MBF and BUPA Australia.

NIB, which floated last November, is looking to add to its operations as it expands from its NSW base against the background of increasing consolidation in the private health industry.

The company, which retains about 280,000 of its members as shareholders, disclosed yesterday that it was discussing tie-ups with a couple of mutual funds but that the talks had only just begun and might not lead to an actual deal.

The managing director, Mark Fitzgibbon, was reluctant to give a timetable for the talks, although he indicated that NIB would consider handing back to its investors some of the capital it has reserved on its balance sheet for acquisitions if the company were unable to seal a deal after 12 months.

Mr Fitzgibbon described NIB's ability to buy other mutuals as "problematic", given that many of them were pretty solvent and therefore had no compulsion to take part in the move to create bigger players.

He still believed that a shake-up was on the cards and cited the forthcoming BUPA Australia and MBF merger later this year, which will create an operator the same size as the market leader, Medibank Private, as an example of how the industry was changing.

"The business case for consolidation is quite compelling," Mr Fitzgibbon told the Herald yesterday as NIB reported its first half-year results as a public company.

Net profit after tax came in at $17.7 million on revenue from insurance premiums of $371 million, although NIB declared an actual loss of $7.6 million, reflecting the one-off costs it had incurred from shedding its mutual status last July and then floating on the ASX.

However, the underlying result was affected by a larger-than-expected drop in income from its stockmarket investments, with that falling to $12.6 million because of sharp declines in share prices.

The company has not paid an interim dividend but is considering a full-year pay-out for the year ending in June because of its strong capital position.

NIB's shares rose 6c yesterday to $1.01 as it indicated it was on target to hit its prospectus target of net profits of $32 million this year.

The reporter owns NIB shares.

© 2008 Sydney Morning Herald

Back to News Index | Back to Home