NIB Holdings Limited (NHF) said net profit tumbled 99% to $404,000. The health insurer also announced it would be undertaking an on-market share buy-back of up to 10% of its shares.
NIB said significant one-off costs associated with its demutualisation and listing on the Australian securities exchange in November 2007 resulted in profit fall.
The company said normalised net profit after tax of $26.7 million for the year ended 30 June 2008, down 28.2% on the previous years results.
Managing director Mark Fitzgibbon said when the company demutualised and listed it promised investors a future of market growth and improved profit margins.
"After excluding one-off costs associated with our transition to a listed company, the results of FY2008 were true to this undertaking," Mr Fitzgibbon said.
Mr Fitzgibbon said the company had a clear view of what drives its earnings and would continue to target a net underwriting margin of 5% and return on equity of at least 15% in the near term.
NIB's normalised net underwriting margin increased from 3.6% in FY2007 to 4.4% in FY2008, while its Management Expense Ratio of 10.3%, compared favourably to its FY2007 result of 10.7%.
"Both are a reflection of our successful organic growth strategy and disciplined approach to running the business efficiently," he said.
The company said revenue for the year was $758.2 million, up 13.8% on the previous comparable period.
"While we expect premium revenue growth to be in the mid to high single digits for FY09, even with the proposed MLS changes, we will continue our work towards improving claims and operating costs efficiencies," Mr Fitzgibbon.
For the 12 months to 30 June 2008 we added 36,605 net new policyholders which was 114.7% of the FY2008 Prospectus Forecast," Mr Fitzgibbon added.
However, Mr Fitzgibbon said volatile investment markets had resulted in low investment earnings for the full year.
"As a result we plan to carefully move to a more defensive investment asset allocation to reduce investment earnings volatility."
Mr Fitzgibbon said NIB continued to be concerned about the potential impact of the proposed changes to the Medicare Levy Surcharge (MLS), particularly the potential loss of younger policyholders and the pressure on future premia.
"We are actively engaging the Federal Government to reconsider the extent of the MLS threshold uplift as well as its approach to premium pricing," he said.
"We continue to monitor developments and have a number of plans in place to address the impact if the proposed changes are legislated."
Mr Fizgibbon said the company had a strong capital position with $105.6 million in excess capital above its internal target and an ungeared balance sheet.
He said this would enable the company to pursue attractive acquisition opportunities as they arise and undertake capital management initiatives.
"In the absence of an acquisition to date, we envisage a return of capital in the near term," he said.
"We are currently reviewing our group capital management plan with a view to determining the most optimal capital structure and method of capital return."
He said as an initial step NIB planned to undertake an on-market share buy-back of up to 10% of issued shares.
The directors declared a fully franked final dividend of 2.1cps.
At 1219 AEST shares in NHF are up 5.5c or 7.6% to 78c.