Medibank Private Ltd. · ASX:MPL
Medibank Private — FY2015 Earnings Presentation
37 slides from Medibank Private's earnings presentation, Aug 21, 2015
Slide 1: Investor presentation
21 August 2015 Investor presentation Presenters George Savvides - Managing Director and Paul Koppelman - Chief Financial Officer
Slide 2: Important Notice
IMPORTANT NOTICE The information contained in this presentation is for information purposes only. No representation or warranty is made that any of these statements or forecasts The information contained in this presentation is not investment or financial product (express or implied) will come to pa
Slide 3: 3
3
Slide 4: FY15 Result Summary
FY15 RESULT SUMMARY NPAT ahead of Prospectus forecast • Statutory Group net profit after tax (NPAT) $285.3m up from $130.8m in FY141 PRO FORMA NPAT 291.8 • Pro forma Group NPAT $291.8m up 13.0% on Prospectus forecast of $258.2m and 268.2 258.5 258.2 ahead of mid-year guidance of $268.2m Actual Prosp
Slide 5: FY15: Actual Result vs Prospectus Forecast
FY15: ACTUAL RESULT VS PROSPECTUS FORECAST NPAT ahead of Prospectus forecast despite lower premium revenue FY15 pro forma NPAT result analysis ($m) 350 3 292 300 54 5 6 1 3 10 268 258 (5) 250 (43) 200 150 100 Management Tax Corporate FY15 Actual Mid-year estimate of FY15 mid-year guidance FY15 Prosp
Slide 6: Group Financial Summary
GROUP FINANCIAL SUMMARY Financial year ended 30 June – Pro forma1 ($m) 2015 2014 Change (%) Health Insurance premium revenue 5,934.8 5,648.7 5.1 Complementary Services revenue 641.2 718.4 (10.7) Revenue 6,576.0 6,367.1 3.3 Health Insurance operating profit 329.3 246.2 33.8 Complementary Services ope
Slide 7: 7
7
Slide 8: Health Insurance Result
HEALTH INSURANCE RESULT Operating profit increase driven by margin improvement Financial year ended 30 June – Pro forma ($m) 2015 2014 Change % • Premium revenue growth slowed due Premium revenue 5,934.8 5,648.7 5.1 to increased membership lapses, cover reductions and changes to Net claims expense (
Slide 9: Medibank is Driving Profitable Growth
MEDIBANK IS DRIVING PROFITABLE GROWTH FY15 pro forma Health Insurance operating profit Drivers of Health Insurance result FY15 pro forma Health Insurance metrics $5,934.8m $329.3m 1 Premium revenue growth $(512.6)m 5.5% • Population growth Premium revenue growth of 8.6% • Policyholder retention and
Slide 10: Premium Revenue and Policyholders
PREMIUM REVENUE AND POLICYHOLDERS Growth moderated by lapse, cover reductions and sales mix movements Change Financial year to 30 June 2015 2014 (%) • Challenging industry conditions, Policyholders1 (thousand): 1,846.0 1,830.0 0.9 including slowing market growth - Medibank policies 1,572.1 1,604.5 (
Slide 11: Health Benefit Claims
HEALTH BENEFIT CLAIMS Managing sustainable claims growth a key focus Financial year ended 30 June – Pro forma ($m) 2015 2014 Change (%) • Health benefit claims management Claims expense (5,170.3) (5,001.0) 3.4 program delivering results Risk equalisation 77.4 116.7 (33.7) Net claims expense • Signif
Slide 12: Management Expenses
MANAGEMENT EXPENSES Further improvement in management expense ratio Financial year ended 30 June – 2015 2014 Change (%) • MER down to 8.6% – better than Pro forma ($m) Prospectus forecast notwithstanding Premium revenue 5,934.8 5,648.7 5.1 lower than expected revenue Management expenses (512.6) (518
Slide 13: Industry Margins
INDUSTRY MARGINS Significant operating profit margin improvement Health Insurance operating profit margin (Australian residents only): top 6 vs. rest of industry1 8% • Operating margin of 5.5%, up 120 bps 2 7% o Opportunities to further improve 6% margins 5% o Increasingly efficient operating 4% bas
Slide 14: Image courtesy Department of Defence
Image courtesy Department of Defence 14
Slide 15: Complementary Services
COMPLEMENTARY SERVICES Strategic review completed • Strategic review o Completed, and driving further Financial year ended 30 June – performance improvements Pro forma ($m) 2015 2014 Change (%) o Ongoing role is to strengthen core Revenue 641.2 718.4 (10.7) health insurance business and benefit memb
Slide 16: fim i
4 > fim i % My 4 V 16 medibank For Better Health
Slide 17: Investment Portfolio
INVESTMENT PORTFOLIO Increased allocation to growth assets Revised strategic Growth asset FX hedge on asset allocation allocation target international implemented increased from equities reduced during the period 17% to 25% to 50% Previous target Current target asset asset allocation As at 30 June 2
Slide 18: Investment Income
INVESTMENT INCOME Investment returns affected by lower equity markets and interest rates • Investment income below FY14 due Financial year ended 30 June – Pro forma ($m) 2015 2014 Change (%) to lower interest rates and lower returns from growth assets Average monthly balance: Growth 496.3 378.0 31.3
Slide 19: Capital
CAPITAL Health Insurance capital within Medibank target range of 12-14% ($m) 30 June 2015 30 June 2014 Total equity 1,442.0 1,393.9 Less: Intangible and illiquid assets (393.7) (356.0) Total tangible and liquid assets 1,048.3 1,037.9 Less: Allowance for declared but unpaid dividends (146.0) (180.0)
Slide 20: Dividend
DIVIDEND Inaugural dividend ahead of Prospectus forecast • Inaugural dividend of 5.3 cents per share fully franked (Prospectus forecast of 4.9 cents per share) 5.3 cents per share • Implied full year dividend of 7.4 cents per share1 fully franked (inclusive of pre-IPO dividend to Commonwealth) 70-80
Slide 21: 21
21
Slide 22: Financial Summary: Group
FINANCIAL SUMMARY: GROUP Corporate overheads, other expenses, tax Financial year ended 30 June – Pro forma ($m) 2015 2014 Change (%) • Corporate overheads decreased Segment operating profit 343.5 279.8 22.8 slightly due to operational improvements Corporate overheads (23.5) (24.5) (4.1) Total operat
Slide 23: Balance Sheet
BALANCE SHEET Strong, debt free balance sheet ($m) 30 June 2015 30 June 2014 Change (%) • Significant cash decrease Cash and cash equivalents 408.7 708.0 (42.3) Financial assets at fair value through profit or loss 1,971.8 1,490.6 32.3 primarily due to change in Trade and other receivables 301.2 338
Slide 24: Cash Flow
CASH FLOW Operating cash flow up, consistent with pro forma operating profit Financial year ended 30 June ($m) 2015 2014 Change (%) Operating profit1 305.5 111.1 175.0 • Net cash flow from operations Changes in working capital2 85.2 43.6 95.4 increase broadly in line with pro Customer acquisition co
Slide 25: Medibank For Better Health
medibank For Better Health
Slide 26: Industry Context
INDUSTRY CONTEXT Participation remains strong; affordability pressures rising Private health insurance industry premium increases, inflation and hospital cover participation rate 8% 50% 7.40 7.16 0.96 1.22 6% 6.20 6.18 48% 5.60 5.06 4% 46% 3.00 2.40 2% 44% 1.50 1.20 0% 42% 2012 2013 2014 2015 Indust
Slide 27: Our Strategy
OUR STRATEGY Medibank’s approach to sustaining profitable growth Optimise core Health Deliver operational Insurance business excellence Product performance Core systems renewal Marketing & sales effectiveness DelPHI – customer Health cost leadership Leverage Complementary relationship management Ser
Slide 28: High Performance Health Insurance
HIGH PERFORMANCE HEALTH INSURANCE Optimising the current business: short to medium term focus Focus areas Strategic programs Key FY15 actions • Introducing new products and benefits to drive • Addressed underperforming products (e.g. mid-Hospitals) Product • Introduced Top Hospitals Essentials produ
Slide 29: Health Insurance Outlook
HEALTH INSURANCE OUTLOOK Driving performance • Premium revenue growth target above 5.5% in FY16 • Management expense ratio target of 8.3% in FY16 and below 8.0% in FY17 • Health Insurance operating profit target above $370m in FY16 29
Slide 30: 2015 Full Year Results
2015 Full Year Results 30
Slide 31: Appendix
iil APPENDIX 2015 Full Year Results
Slide 32: Group NPAT Reconciliation
GROUP NPAT RECONCILIATION Statutory to pro forma Financial year ended 30 June ($m) 2015 2014 Change (%) Statutory NPAT 285.3 130.8 118.1 Impairment expenses1 - 96.4 - Net IPO transaction costs2 5.6 2.4 133.3 Reorganisation expenses3 - 24.6 - Other4 0.9 4.3 (79.1) Pro forma NPAT 291.8 258.5 12.9 1 Pr
Slide 33: FY15 Actual Result vs Prospectus Forecast
FY15 ACTUAL RESULT VS PROSPECTUS FORECAST Financial year ended 30 June 2015 Prospectus forecast 2015 Actual 2015 Actual vs. Adjusted1 – Pro forma ($m) Original Adjusted1 ($m) (%) Health Insurance Premium revenue 5,996.7 5,996.7 5,934.8 (61.9) (1.0) Net claims expense (incl. risk equalisation) (5,183
Slide 34: Group Financial Summary: Half by Half
GROUP FINANCIAL SUMMARY: HALF BY HALF Pro forma ($m) 1H15 2H15 FY15 1H14 2H14 FY14 Revenue 3,269.7 3,306.3 6,576.0 3,148.5 3,218.6 6,367.1 Health Insurance operating profit 173.5 155.8 329.3 126.5 119.7 246.2 Complementary Services operating profit 7.2 7.0 14.2 14.5 19.1 33.6 Segment operating profi
Slide 35: Health Insurance Result: Half by Half
HEALTH INSURANCE RESULT: HALF BY HALF Pro forma ($m) 1H15 2H15 FY15 1H14 2H14 FY14 Premium revenue 2,943.3 2,991.5 5,934.8 2,797.4 2,851.3 5,648.7 Net claims expense (2,535.1) (2,557.8) (5,092.9) (2,413.9) (2,470.4) (4,884.3) (incl. risk equalisation) Gross profit 408.2 433.7 841.9 383.5 380.9 764.4
Slide 36: Change in Policyholders
CHANGE IN POLICYHOLDERS Financial year ended 30 June (thousand) 2015 2014 Change (%) Opening balance (Policyholders1) 1,830.0 1,803.7 1.5 Acquisitions2 218.0 207.5 5.1 Lapses2 (202.0) (181.2) 11.5 Closing balance 1,846.0 1,830.0 0.9 – Acquisition rate3 11.9% 11.4% 50bps – Lapse rate3 11.0% 10.0% 100
Slide 37: Glossary
GLOSSARY The contract between the Commonwealth and OSHC Overseas students hospital cover ADF Health Medibank Private Limited for the provision of a Services national integrated healthcare service to the OVHC Overseas visitors hospital cover Contract Australian Defence Force PNIC Provider Networks &