NIB Earnings: Shock Margin Decline, but It Shouldn’t Get Materially Worse

We lower our NIB fair value estimate by 6.5% to AUD 7.20 on a weaker-than-expected fiscal 2024 result. The narrow-moat insurer's margins in private health insurance normalized more quickly than we expected, and the earnings outlook for international students is also weaker. A change in accounting standards complicates matters, but underlying net profit after tax increased by 3% to AUD 196 million, a hefty 16% miss against our forecast. Even adding back around AUD 22 million in one-off costs, mostly related to acquisitions and integration in the National Disability Insurance Scheme segment, profit disappointingly still lands 7% below our forecast. Under the new accounting standards, net profit after tax was AUD 182 million.