The NIB Holdings Limited (ASX: NHF) share price fell to a three-and-a-half-year low after the company issued new guidance for FY25 on Tuesday.

The ASX financial stock opened 5% down at $5.70 per share.

It then embarked on a choppy journey and ultimately fell further to an intraday low of $5.58, a 7% decline from yesterday's closing price of $6.

And that was all in the first 90 minutes of trading.

But then the stock came full circle.

The NIB share price is currently trading at $6 and has fully recovered from this morning's volatility.

So, what caused all that?

Let's check out this FY25 guidance.

What shook the NIB share price on Tuesday?

NIB provided guidance for its FY25 underlying operating profit (UOP) of $235 million to $250 million.

This is lower than the UOP of $257.5 million in FY24 and $263.2 million in FY23.

The UOP guidance, coupled with a warning that the company currently expects a 1H FY25 operating loss, is likely to have caused investors anxiety this morning.

NIB's CEO and Managing Director, Mark Fitzgibbon, said "extraordinary growth" in New Zealand claims was already weighing heavily on the company's group performance for FY25.

So much so that management expects an operating loss of about A$10 million in 1H FY25.

Fitzgibbon explained:

High post-pandemic claims inflation is similarly impacting other private health insurers in New Zealand.

We expect conditions in New Zealand to improve in 2H25 with higher pricing, operating cost savings, and claims inflation moderating and for full-year profitability, albeit weaker than in FY24.

What else did the company say?

In today's statement on guidance, NIB reported that the flagship Australian Residents Health Insurance business, arhi, is growing strongly.

NIB said net policyholder growth for the first four months of FY25 was up 52.9% as of 31 October compared to the prior corresponding period (pcp).

This represents the strongest start to a new financial year for the arhi business since FY08.

Regarding arhi, Fitzgibbon said:

Currently our annualised growth rate of 3.2% is likely well ahead of average system growth.

We expect our net margin for the full financial year will be in the order of 6.0% – 7.0%, aligned with our target range.

At last week's annual general meeting, the company said it had 728,901 arhi policyholders as of 31 October, up 3.2% on the pcp.

There were also 221,368 iihi policyholders, up 10.8% pcp, and 164,094 New Zealand policyholders, up 0.8% pcp.

At the AGM, NIB chair David Gordon acknowledged the difficult economic times for customers.

The financial year 2024, particularly the second half, was a difficult period for our economies, for thehealthcare sector, and for our members and customers.

Inflation proved sticky, a troublesome scenario for Australia's Reserve Bank, which held interestrates higher for longer than some of its offshore counterparts. Household budgets came underpressure and, for much of the year, governments were looking for solutions.

We saw increased medical cost inflation, higher claims utilisation, and very public and intensepressure from the private hospitals for greater remuneration.

Despite this, Gordon said the company had delivered "another strong result" in FY24.

Share price snapshot

The NIB share price has fallen 19% in the year to date.

This compares to an 8% increase in the S&P/ASX 200 Index (ASX: XJO) and a 29% uplift in the S&P/ASX 200 Financials Index (ASX: XFJ).