With the significant de-rating of the stock, I started the day...

With the significant de-rating of the stock, I started the day thinking about dusting off the model with a view to becoming a shareholder once again.

However, after reviewing the result I was left with more questions that before I started leafing through the announcement.

I have to say, there appears to be a permanent change in NIB's business landscape - not just in terms of the limited take-up of private health cover - but in the inability of claims inflation to be arrested.

NIB management is talking increasingly about proactively engaging its customers towards healthier lifestyle choices that avoid the serious health issues and hence, the expensive medical treatment.

But that is an entirely different operating and business model than maintaining a margin when the government kindly matches your claims inflation with a premium hike.

As a shareholder over many years, the sustainability of regulated premium hikes in line with, and sometimes above, claims increases was always something that niggled in the back of my mind.

The events of the past 12 months, culminating with this result, tells me that the crunch moment has arrived where the market can bear no more.

It's about to commence on a journey that is a totally different one to the past decade.

So the investment thesis for this company has substantially changed.

It's going from ticket-clipper of a legislated margin (which is easy as), to a health-problem-prevention-cum-medical-consulting-cum-lifestyle company (far less easy to get right, with the desired results, if any, only to become manifest over the longer-term).

I have to say, I've listened to, maybe 14 or 15 NIB presentations from Mark Fitzgibbon and he has always exuded accomplishment and inspiration. But the past two results had him coming across, in my opinion, far less at ease than his usual level of confidence.

Whereas before I'd argue this was a definite premium-to-market business, with the fundamental change that I now see happening, I think its a mere market multiple type stock.

As such, even after the loss of more than one-third of the market value of the company from its peak, the current 17x P/E multiple makes the stock appear to be only fairly valued.

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