Medibank Private Ltd. · ASX:MPL
Medibank Private — Investor Presentation (February 2019)
33 slides from Medibank Private's investor presentation, Feb 15, 2019
Slide 1: HY19 Results Investor Presentation
Chief Executive Officer Chief Financial Officer Friday 15 February 2019
Slide 2: Highlights
Highlights Craig Drummond - Chief Executive Officer Resse boo
Slide 3: Important notice
Important notice The information contained in this presentation is for information purposes only. The information contained in this presentation is not investment or financial product advice and has been prepared without taking into account the investment objectives, financial situation or particula
Slide 4: Group operating profit, Group NPAT, Interim dividend
Group operating profit Group NPAT Interim dividend • • • • – – – • •
Slide 5: Milestone scorecard - 1H19 update
Milestone scorecard - 1H19 update medibank Good progress with all milestones on track and a new Medibank Health milestone set beyond FY19 Objectives 1H19 update 1. Cust i Customer NPS Avg Service NPS PHIO complaints oS OES) : ’ (Gap to peers) 1H18_1H19 1H19: 21.0% share AMS IRRIMN —Continuedimprovem
Slide 6: Strategy and FY19 priorities
Strategy and FY19 priorities medibank Medibank’s strategy remains unchanged, focused on growing PHI by leveraging our dual brands, building competitive advantage in our customer offering and transforming into a broader health services company etter Health for Better Lives Strategic pillar * Personal
Slide 7: Private Health Insurance
Private Health Insurance We have a clear strategy to deliver an exceptional customer experience through differentiated products and services medibank Healthier, Supportive, Personalising the customer experience ° Strengthening of digital member services for both brands ¢ Automate platform to drive p
Slide 8: 2019 reform
2019 reform medibank Upcoming reform is a real opportunity to improve the transparency, simplicity and affordability of PHI Mandatory reform Optional reforms gold / silver / bronze / basic product standardisation! Outcomes * Customers will have more * Improves affordability * Provides a lower price
Slide 9: Medibank Health
Medibank Health medibank Our strategy and our ability to execute is unchanged. We will continue to build scale and capability in healthcare delivery * Delivered by MHS, HealthStrong and Home Support Services (HSS) * Stable operating performance with broad spread of * Trials continue in dialysis, che
Slide 10: Financial results
medibank Financial results Mark Rogers — Chief Financial Officer
Slide 11: Group financial summary
Group financial summary medibank Six months ended 31 Dec ($m) 1H19 1H18 Change Health Insurance premium revenue 3,240.3 3,175.1 2.1% Medibank Health revenue! 320.6 291.9 9.8% Revenue 3,560.9 3,467.0 2.7% Health Insurance operating profit 281.5 277.3 1.5% Medibank Health operating profit 28.9 25.2 14
Slide 12: Health insurance result
Health insurance result Continued improvement in operating performance Six months ended 31 Dec ($m) 1H19 1H18 Change Premium revenue 3,240.3 3,175.1 2.1% Claims expense (2,699.7) (2,655.0) 1.7% Risk equalisation 15.2 30.4 (50.0%) Net claims expenses (2,684.5) (2,624.6) 2.3% Gross profit 555.8 550.5
Slide 13: Health insurance — policyholders
Health insurance — policyholders Encouraging resident policyholder growth of 0.9% over the last 12 months medibank Six months ended 31 Dec 1H19 1H18 Change Policyholders' (thousand): Opening balance 1,780.9 1,776.1 0.3% Acquisitions 94.9 88.3 7.5% Lapses (88.5) (92.5) (4.3%] Closing balance 1,787.3
Slide 14: Health insurance — claims
Health insurance —- claims medibank Underlying average net claims expense per policy unit up 2.1% * Hospital Claims - up 2.2%, reflecting: — Subdued utilisation growth rate of 1.1% — Slowing hospital claims growth due to changing case mix, savings from Medibank at Home program and improved hospital
Slide 15: Health insurance — claims
Health insurance —- claims medibank Private hospital outlays up 2% - reflecting benign utilisation growth Net claims expense Indicative composition and (including risk equalisation) movement in dollar value vs. 1H18 $value movement Denta 43% BHospital ™ Extras Iptica +2% $2,624.6m $2,684.5m 4 aN = P
Slide 16: Health insurance — management expenses
Health insurance —- management expenses medibank Overall decrease in MER includes a 1.3% reduction in operating expenses + Flat overall management expenses, including a 1.3% reduction in operating expenses due to sound cost management and ongoing benefit from our productivity program * DAC amortisat
Slide 17: Medibank Health
Medibank Health medibank Strong result reflects contributions from HSS and HealthStrong Continuing businesses * Four-month revenue and operating profit contribution from Home Support Services (HSS) of approximately $13 million and $2 million, respectively + Increase in operating profit due to strong
Slide 18: Investment portfolio and investment income
Investment portfolio and investment income medibank Reduction in investment income driven by lower equity and credit market returns * Investment performance was in-line with negative returns in equities and a widening of credit spreads that resulted in the $55.6m decline in investment income. Normal
Slide 19: Cash flow
Cash flow medibank Reflects increase in working capital and the purchase of HSS Six months ended 31 Dec ($m) 1H19 UGE een) * Working capital increase Profit before net investment income and income tax 286.3 286.4 (0.1) srmente od contra Changes in working capital (78.5) 7.0 (85.5) receipts in Mediba
Slide 20: Capital
Capital medibank Our capital position remains strong and balance sheet debt free + Health Insurance capital continues to be at the top of the 12-14% target range, with unallocated capital of $111.9 million * The acquisition of HSS resulted in a decrease in unallocated capital and an increase in inta
Slide 21: Dividend
Dividend medibank Increased interim dividend + Interim dividend up 0.20 cents to 5.70 cents (fully franked] + Payment date of 28 March 2019 (ex-dividend date: 5 March 2019) + Interim! dividend represents a payout ratio of 67% of Underlying NPAT (1H18: 65%), normalising for investment market returns
Slide 22: Navigating a lower premium environment
Navigating a lower premium environment medibank Broad response across four levers 2 Customer growth Hospital contracting: Policyholder growth: ¢ Re-contract in-line with premium rate rise environment * Stabilisation of Medibank volumes + Leverage capability + Continuation of dual brand retention str
Slide 23: Summary and outlook
medibank Summary and outlook Craig Drummond - Chief Executive Officer
Slide 24: Private Healthcare Reform
Private Healthcare Reform medibank Creating a stronger and more sustainable health system requires meaningful reform * The sustainability and strength of Australia’s health system is reliant on both a strong public and private health system * Over 13 and a half million Australians participate in the
Slide 25: Outlook
Outlook medibank ¢ Expect flat overall PHI market volumes to persist * On the current policyholder trajectory we expect to see Medibank brand volumes stabilise by the end of FY20 * Hospital and extras utilisation growth is expected to remain subdued for the remainder of FY19 * Management expenses fo
Slide 26: Appendix
medibank Appendix
Slide 27: 2019 Reform
2019 Reform medibank Summary Optional reforms - to be implemented for Medibank and ahm customers from 1 April 2019 Higher excess - Customers will be able to choose - Higher excess will be available on - Provides a lower price point in hospital cover with excess of $750 for many Medibank and ahm prod
Slide 28: Normalisation adjustment to investment income
Normalisation adjustment to investment income Domestic Equities (7.0%) 13.0 8.6% (5.3) 18.3 eo (4.6%) 5.5 8.5% (3.3) 8.8 International Equities (Hedged) (8.8%) 8.5 10.1% (4.3) 12.8 Infrastructure (1.4%) 2.5 3.8% - 2.5 Total 8.0% (3.1%) 29.5 7.7% (12.9) 42.4 Group NPAT 207.7 245.6 (15.4%) Normalisati
Slide 29: Balance sheet
Balance sheet medibank ($m) 31 Dec 2018 30Jun2018 31 Dec 2017 Cash and cash equivalents 409.3 470.1 610.0 Financial assets at fair value through profit or loss 1,992.0 2,276.5 1,843.9 8.0% Trade and other receivables 290.5 292.2 281.2 3.3% Deferred acquisition costs 34.7 36.2 35.6 (2.5%) Other 18.0
Slide 30: Group financial summary - half by half
Group financial summary - half by half Health Insurance premium revenue 3,240.3 3,144.4 3,175.1 2.1% 3.0% Medibank Health revenue 320.6 295.0 291.9 9.8% 8.7% Revenue 3,560.9 3,439.4 3,467.0 2.7% 3.5% Health Insurance operating profit 281.5 258.3 277.3 1.5% 9.0% Medibank Health operating profit 28.9
Slide 31: Health insurance policyholders — half by half
Health insurance policyholders — half by half Premium revenue ($m) 3,240.3 3,144.4 3,175.1 2.1% 3.0% Policyholders' (thousand): Opening balance 1,780.9 1,771.9 1,776.1 0.3% 0.5% Acquisitions 94.9 116.5 88.3 7.5% (18.5%) Lapses (88.5) (107.5) (92.5) (4.3%) (17.7%) Closing balance 1,787.3 1,780.9 1,77
Slide 32: Investment portfolio
Investment portfolio medibank As at 31 Dec 2018 Balance ($m) _ Portfolio composition Target asset allocation| Australian Equities 110.2 4.8% 5.0% International Equities 141.7 6.2% 6.0% Property 160.4 7.0% 7.0% Infrastructure 471.7 2.1% 2.0% Growth 460.0 20.1% 20.0% Fixed income! 1,217.2 53.2% 52.0%
Slide 33: Glossary
Glossary medibank 1H Six months ended/ending 31 December of the relevant PHIO Private Health Insurance Ombudsman financial year The primary person who is insured under a private 2H Six months ended/ending 30 June of the relevant Policyholder health insurance policy (other than in relation to financi
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