NHF - NIB Holdings

[mark100]

NHF is a listed Health Insurer. They have excess capital and as announced with the interim results in Feb, they are planning a capital return of 16cps. This is due to happen in June, subject to ATO and shareholder approval.

I have been a holder since early in the year as they had flagged the capital return late last year. However I expect the shares will get another boost as the paperwork goes out to shareholders and the ex date gets closer. I'm expecting this to happen in the next month or so.

Earnings guidance has been confirmed so I view NHF as a low risk trade in the current market

[mark100]

The ex date for the 16c capital return is 7 July

[Lizard]

Are you still holding, Mark?

I had a quick look at these last night and thought they looked perfect for the investment/dividend portfolio. Bought a few today to get a feel for it, although trading in it seems a bit soft.

[mark100]

Hi Liz, I sold after the re-rating in Aug/Sept last year. Combined withe the capital return it was a nice low risk trade. Now it is probably closer to fair value (PE around 10) with a good dividend flow and possibly the prospect of another smaller capital return or special div with the full year results.

When markets get jumpy it has a history of getting hammered intra-day on low liquidity and that's when I would consider it again. Also, the govt over here as just anounced means testing of the private health insurance tax rebate so some people will have the effective cost of their private health insurance rise. This is a slight negative for NHF, but one I can't quantify

[Lizard]

NHF looks to be on the move last couple of sessions with move up to $1.68 today. Happy enough with this one for the long term/dividend portfolio.

[slimwin]

Are health insurers expected to have higher costs ( less profit) with an ageing population or do better for more people signing up for health insurance?

[born2invest]

I see NIB Insurance has had a big advertising campaign of the re-branding of Tower who they bought recently.

This has been on my watchlist for a while, but the growth in EPS is slowing as they are getting bigger, meaning I require more of a discount to factor this in if I was going to buy.

[Lizard]

I'm still holding. They are well run and seem to be able to take advantage of opportunities.
http://www.smh.com.au/business/nib-hitting-new-highs-as-investors-swirl-20131117-2xp5e.html

[born2invest]

I'm still holding. They are well run and seem to be able to take advantage of opportunities.
http://www.smh.com.au/business/nib-hitting-new-highs-as-investors-swirl-20131117-2xp5e.html

What would it take for you to buy more? Have you held for long?

[Lizard]

What would it take for you to buy more? Have you held for long?

According to this thread, I bought a few on 14/2/2012 - Yahoo says they traded at $1.47 - $1.49 that day and have paid a total of 19.25cps in divs since then, currently $2.53.

Not sure what would make me buy more - since my position size is currently large enough, I probably wouldn't see the need.

Buying is more work than holding - when buying, there is a bit of research, whereas holding only requires keeping one eye on the chart, one eye on the announcements and the occasional mulling of macro influences. If any of those ever sent my instincts into overload, I would spend a focussed hour deciding on a sell or perhaps another buy.

[macduffy]

I should have bought a few of these. Pay them enough in premiums since the purchase of Tower Health!

:(

[macduffy]

I should have bought a few of these. Pay them enough in premiums since the purchase of Tower Health!

:(

Apologies for the duplication.

[born2invest]

Lizard,

What do you look for in an insurance business to determine if it is a good one or an average one?

More growth in net premium income or more into the book value side of things?

I can see NIB appealing more to youth that the likes of other insurers. They have been taking market share off other insurers over the past few years but this can't continue forever.

[Lizard]

Definitely would look closely at assets on an insurance company. Earnings growth and margins to be considered in context of market and business cycle. Quality of assets can always be a hard one though - so I tend to look hard at what management say in their presentations and reporting.

In a good quality business, the numbers and the words agree with each other, the company consistently says what it is going to do and then does it and the presentation content is well targeted to the investor audience. All of these show a management that both understands their business, is focussed, clear-thinking and values their shareholders. This doesn't just apply to insurance companies!

[born2invest]

Definitely would look closely at assets on an insurance company. Earnings growth and margins to be considered in context of market and business cycle. Quality of assets can always be a hard one though - so I tend to look hard at what management say in their presentations and reporting.

In a good quality business, the numbers and the words agree with each other, the company consistently says what it is going to do and then does it and the presentation content is well targeted to the investor audience. All of these show a management that both understands their business, is focussed, clear-thinking and values their shareholders. This doesn't just apply to insurance companies!

By assets you mean their "float"?

The buffer of incoming premiums vs outgoing claims?

[Lizard]

I'm probably not the best person to learn off. Try some on-line articles on valuing insurance companies:

http://www.investopedia.com/articles/investing/082813/how-value-insurance-company.asp

www.casact.org/education/specsem/valinsurance/handouts/waller.ppt‎

http://www.columbia.edu/~dn75/Analysis%20and%20Valuation%20of%20Insurance%20Comp anies%20-%20Final.pdf

[born2invest]

I see MorningStar (who go through ASB Securities) have put a $2.70 value on the company and expect it to grow EPS 11.1% in 2014 and 9.4% in 2015.

I think this is a bit steep. I don't think their growth will continue at the rate it has been in the past and will slow to a more 7% growth over the next several years.

Also their float invests very conservatively in cash, fixed term maturities, etc.

Interesting to see if they look to grow by acquisition anytime over the next few years, perhaps into Singapore, Indonesia, Malaysia, etc.

I'm still very confident in the long term economics of health insurance, certainly since NIB aims more at the youth (18-30) market.

I've been doing a bit of reading the past two weeks on Warren Buffetts insurance businesses and how he values them and out of all insurance companies publicly listed on the NZX and ASX, NIB Holdings is looking like the best of the bunch.

[Lizard]

Continuing to move steadily up. Reached $3.35 this morning - up 100% in last two years, plus divs which is not too bad. :)