Nib Holdings Ltd · ASX:NHF
Nib — H1 2017 Earnings Presentation
30 slides from Nib's earnings presentation, Feb 20, 2017
Slide 1: 2017 Half Year Results Investor Presentation
2017 Half Year Results Investor Presentation 20 February 2017 1
Slide 2: Disclaimer
Disclaimer The material in this presentation is a summary of the results of nib holdings limited (nib) for the 6 months ended 31 December 2016 and an update on nib’s activities and is current at the date of preparation, 20 February 2017. Further details are provided in nib’s half year accounts and r
Slide 3: Mark Fitzgibbon
Mark Fitzgibbon Chief Executive Officer & Managing Director 3
Slide 4: 1H17 Financial Highlights
1H17 Financial Highlights Total Group Revenue UOP1 Net Investment Income $995.0m $95.2m $13.8m 7.3% 43.4% 112.3% Statutory Operating Profit $90.9m ( 53.3%) ROE2 NPAT Statutory EPS 31.7% $71.1m 16.4cps 8.8% 65.0% 65.7% Underlying EPS 17.1cps ( 55.5%) Note: The percentage increases shown above is the
Slide 5: 1H17 Snapshot
1H17 Snapshot Positive result with Group revenue of $995.0m (▲7.3%) and underlying operating profit1 (UOP) of $95.2m2 (▲43.4%). Statutory operating profit of $90.9m (▲53.3%). Guidance updated with FY17 UOP expected to be $140m – $150m (statutory operating profit of $137m – $147m). In difficult marke
Slide 6: Interim Dividend
Interim Dividend • Dividend reflects ongoing earnings growth. (cps) 20.0 Interim Dividend Final Dividend • 1H17 interim dividend increased to 8.50 cps, fully franked (1H16: 5.75 cps) 15.0 • Ex-dividend date – 2 March 2017 • Record date – 3 March 2017 10.0 9.00 • Payment date – 3 April 2017 5.75 6.00
Slide 7: Michelle McPherson
Michelle McPherson Chief Financial Officer & Deputy CEO 7
Slide 8: 1H17 Revenue
1H17 Revenue Total revenue by segment Total Group revenue of $995.0m (▲ 7.3%) due to: ($m) • arhi premium revenue of $829.8m (▲ 6.2%), accounting for $995.0m 1,000.0 83.4% of total Group revenue. $927.2m • International (inbound) health insurance (iihi) premium 800.0 revenue of $35.9m (▼ 13.5%). Seg
Slide 9: 1H17 Group UOP
1H17 Group UOP UOP by segment Group UOP of $95.2m (▲ 43.4%) due to: ($m) • Strong operating performance in arhi, with UOP of $73.0m 100.0 $95.2m (▲ 41.2%). Favourable claims environment a key driver of 90.0 the strong 1H gross margin. 80.0 • Adjacent businesses accounted for 27.0% of Group UOP $66.4
Slide 10: 1H17 arhi Performance
1H17 arhi Performance 1H17 1H16 Change • UOP result of $73.0 (▲41.2%) due to: Policyholder growth (%) 2.1 1.8 0.3% • Successful ongoing execution of multi-channel growth Lapse (%) 5.8 5.3 0.5% strategy, with nib accounting for 50.1% of industry Premium revenue ($m) 829.8 781.3 6.2% growth (1H17). Cl
Slide 11: arhi Claims & Margin Trends
arhi Claims & Margin Trends nib drawing rate claims inflation1 (including risk equalisation) • Recent trends indicate claims inflation may have Rolling 12 months average – figures to 31 January 2017 “bottomed” with reversion to more normal trends 8.00% and seasonality expected for 2H17. • Full year
Slide 12: 1H17 iihi Performance
1H17 iihi Performance 1H17 1H16 Change • Dramatic improvement in earnings (UOP ▲146.3%) Policyholder growth (%) 14.0 14.5 (0.5)% boosted by strong sales (international students and Premium revenue ($m) 35.9 41.5 (13.5)% workers) as well as deliberate decision to not renew a Claims expense ($m) (12.8
Slide 13: 1H17 NZ Performance
1H17 NZ Performance 1H17 1H16 Change • Continues to perform in line with expectations, with Policyholder growth (%) 1.0 25.21 (24.2)% revenue ▲ 25.2% and UOP ▲39.7%. 1H17 included full Premium revenue ($m) 100.0 79.9 25.2% period benefit of OnePath3. Claims (medical and PPB2 settlement) ($m) (64.7)
Slide 14: 1H17 WNG Performance
1H17 WNG Performance 1H17 1H161 (5 month result) Change • Business performing soundly under nib ownership. Policyholder sales 303,938 236,308 28.6% • UOP of $3.1m (▼26.2%) due to Gross Written Premium ($m) 2 62.1 49.7 24.9% • investment being made to expand operations Operating income ($m) 27.0 22.0
Slide 15: Investments, Gearing & Capital
Investments, Gearing & Capital ($m) 1H17 1H16 Change • Net investment income (▲ 112.3%) due to market Net investment income 13.8 6.5 112.3% performance and above internal benchmarks. Finance costs (2.4) (2.6) (7.7)% • Interest cover of 44:1 at 31 December 2016 well Available capital above internal t
Slide 16: Mark Fitzgibbon
Mark Fitzgibbon Chief Executive Officer & Managing Director 16
Slide 17: Industry Outlook
Industry Outlook • Market conditions for arhi to remain "soft" with affordability a key consumer concern. PHI participation rates likely to remain steady. Medium to longer term growth prospects favourable. • Increasing healthcare spending reflecting a combination of price inflation and utilisation g
Slide 18: Our Focus
Our Focus • Above arhi system growth (target 4% - 5% p.a.) through distribution strategy, price competitiveness, improved sales/retention skills and world class customer service. • Deeper insights across the Group into consumer behaviour, mitigating adverse selection and retention. • Achieve more "b
Slide 19: FY17 Guidance
FY17 Guidance ($m) FY17 (Guidance) • FY17 UOP expected to be $140m – $150m Statutory operating profit 137 - 147 (statutory operating profit of $137– $147m). One-off transaction and M&A costs (4.4) • FY17 investment returns to be in line with relevant internal benchmarks2. One-off profit from restruc
Slide 20: Appointment of Anne Loveridge, Independent Non-Executive Director
Appointment of Anne Loveridge Independent Non-Executive Director • Highly experienced Non-Executive Director with extensive knowledge of financial and regulatory reporting, risk management and compliance frameworks. • Currently a Non-Executive Director of Platinum Asset Management, National Australi
Slide 21: Appendix
Click to edit Master title style Appendix 21
Slide 22: Policyholder & Other Data
Policyholder & Other Data (Underwriting Segments) nib Group 1H17 1H16 Total persons covered 1,378,127 1,324,763 Total policyholders 751,629 706,226 − Australian Residents Health Insurance 540,403 519,107 − International (Inbound) Health Insurance 104,766 82,205 − nib New Zealand 106,460 104,914 Empl
Slide 23: Detailed Income Statement (UOP)
Detailed Income Statement (UOP) ($m) 1H17 1H16 Change Net premium revenue1 965.7 902.7 7.0% - arhi 829.8 781.3 6.2% - iihi 35.9 41.5 (13.5)% - nibnz 100.0 79.9 25.2% Net claims expense1 (661.1) (638.8) 3.5% - Hospital claims paid (arhi) (424.9) (396.8) 7.1% - Ancillary claims paid (arhi) (164.4) (15
Slide 24: Underlying to Statutory Operating Profit
Underlying to Statutory Operating Profit ($m) 1H17 1H16 Change UOP 95.2 66.4 43.4% - arhi 73.0 51.7 41.2% - iihi 13.3 5.4 146.3% - nibnz 10.9 7.8 39.7% - WNG 3.1 4.2 (26.2)% - nib Options (1.6) (1.0) 60.0% - Unallocated (3.5) (1.7) 105.9% Amortisation of acquired intangibles (3.8) (3.5) 8.6% - arhi
Slide 25: arhi claims & margin trends
Net margin MER Gross margin 0.0% 2.0% 4.0% 6.0% 8.0% 0.0% 4.0% 8.0% 12.0% 16.0% 20.0% 10.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 1H12 1H12 1H12 2H12 2H12 2H12 FY12 FY12 FY12 FY12 1H13 1H13 1H13 2H13 2H13 2H13 FY13 FY13 FY13 FY13 1H14 1H14 1H14 2H14 2H14 2H14 FY14 FY14 FY14 FY14 1H15 1H15 1H15 arhi claims
Slide 26: Detailed Management Expenses
Detailed Management Expenses (Underwriting Segments) Amortisation of (Commissions (Commissions (Commissions Underwriting Management Employment Occupancy intangibles Underlying amortised) Marketing Marketing Marketing Marketing Expenses Expenses Expenses deferred) acquired Indirect Indirect Indirect
Slide 27: Premium Payback (PPB)
Premium Payback (PPB) Movement in central estimate of PPB liability • Premium Payback (PPB) relates to previously offered ($m) 1H17 1H16 products, where customers are entitled to receive a refund Opening Balance – central estimate 25.6 38.0 (or partial refund) of premiums paid less any claims made,
Slide 28: Other Income & Expenses
Other Income & Expenses ($m) 1H17 1H16 Change Other income Complementary insurance 1.2 1.2 - nib Options income (0.0) 0.0 - Agency fee (excluding nib Options) 0.2 0.1 100.0% Rental income 0.1 0.5 (80.0)% Sundry income 0.8 0.2 300.0% Digital Health Ventures income 0.1 0.5 (80.0)% Total other income 2
Slide 29: Investment Asset Allocation
Investment Asset Allocation Consolidated Australian Investment Portfolio New Zealand Investment Portfolio Net return ($m) Net return ($m) Balance ($m) at Allocation Allocation at Allocation 12 months to 12 months to 31/12/2016 at 31/12/2016 31/12/2016 at 31/12/2016 31/12/2016 31/12/2016 Cash1 117.9
Slide 30: Group NPAT (1H16 – 1H17)
Group NPAT (1H16 – 1H17) ($m) 120.0 110.0 63.0 100.0 90.0 7.3 4.9 80.0 19.6 0.2 70.0 4.6 12.1 11.0 60.0 50.0 71.1 40.0 43.1 30.0 20.0 30