Nib Holdings Ltd · ASX:NHF
Nib — Investor Day (June 2016)
63 slides from Nib's investor day presentation, Jun 15, 2016
Slide 1: 2016 Investor Day Presentation
nib holdings limited t 13 14 63 Head Office f 02 4925 1999 22 Honeysuckle Drive Newcastle NSW 2300 e nib@nib.com.au abn 51 125 633 856 w nib.com.au 15 June 2016 Company Announcements Office ASX Limited 20 Bridge Street SYDNEY NSW 2000 nib holdings limited 2016 Investor Day Presentation Attached is n
Slide 2: 2016 Investor Day
2016 INVESTOR DAY 15 JUNE 2016 2016 | All figures in this document are represented in Australian dollars unless otherwise stated
Slide 3: Agenda
2 Agenda Welcome and strategic update Mark Fitzgibbon CEO/Managing Director Australian Residents Health Insurance Rhod McKensey Group Executive Australian Residents Health Insurance –––– morning tea nib New Zealand Rob Hennin CEO nib New Zealand World Nomads Group Michael Callaghan CEO World Nomads
Slide 4: Welcome and strategic update
3 Welcome and strategic update Mark Fitzgibbon nib is a major sponsor of AFL team the Geelong Cats
Slide 5: Mission
4 Mission To help people access and afford healthcare when and where needed right care, right time, right place, right price nib is the naming rights sponsor of nib Stadium in Perth
Slide 6: Vision
5 Vision nib is a leading financier and facilitator of healthcare with a reputation for innovative products, value for money, outstanding customer service, being a good corporate citizen and strong shareholder returns. nib is a major sponsor of NRL team the Newcastle Knights
Slide 7: Key strategies
6 Key strategies 1 2 3 4 5 6 7 Maintain arhi1 Pursue arhi B2B Grow coverage and Grow market share Leverage core Opportunistically Continue to drive brand positioning partnerships (inc market share in in international Group assets pursue mergers engagement, and investment whitelabelling) in New Zeala
Slide 8: Future scenarios
7 Future scenarios Globalisation Third Pillar The future shape of PHI is by no means certain Big Brand Intruders Future The Generals but nib remains strategically well positioned. Scenarios HMO Life/Health Bundle Duopoly
Slide 9: Variation in health outcomes is a world-wide problem
8 Variation in health outcomes is a world-wide problem Outcome customer measurement and transparency is key to driving down variation. Measuring multiple outcomes | Prostate cancer care in Germany 5 year disease specific survival Severe erectile dysfunction Incontinence BEST HOSPITAL BEST HOSPITAL B
Slide 10: Increasing health care costs are squeezing out other public spending priorities
9 Increasing health care costs are squeezing out other public spending priorities Massachusetts State Budget – FY01 versus FY11 Source: Massachusetts Budget and Policy Centre Budget Browser
Slide 11: Outlook & guidance
10 Outlook & guidance FY16 outlook remains positive � Real healthcare spending will continue to grow circa GDP + 2%1 � Expect PHI reforms will be a net positive � Claims inflation taking a lower trajectory with opportunities to improve PHI affordability and stabilise margins � Adjacent businesses wi
Slide 12: Australian Residents Health Insurance
11 Australian Residents Health Insurance Rhod McKensey
Slide 13: arhi snapshot
12 arhi snapshot Continues to be core earnings driver History of above 5 year premium Customer first industry average revenue CAGR culture (NPS) policyholder growth of 9.6% (industry 7.7%) 55+ Brand positioned to Successful use of Proven capability target under 40s other brands and in whitelabelling
Slide 14: Market overview
13 Market overview Current trends 1 2 3 Industry policyholder Health fund affordability Consumers increasingly growth has slowed a hot issue with a empowered and number of initiatives engaged, fuelled by being pursued to increasing levels of address rate of media interest, leading premium growth to
Slide 15: Market overview
14 Market overview Current state What we like � Supportive Government policies and incentives encouraging PHI take up � Recent trends in lower claims inflation reducing pressure on future premium increases � Efforts by funds and Government to improve consumer engagement and transparency � Efforts by
Slide 16: Our strategy
15 Our strategy Focus on Ensure we deliver Give our sustainable flawlessly on the customers a growth basics reason to stay beyond just health insurance � Direct � Eliminate sources � nib Rewards of failure demand � Retail brokers � Better information � Make transacting and tools to � Whitelabel part
Slide 17: Our strategy
16 Our strategy Growth Design our business to attract the right kind of customers How � Product design � Pricing � Marketing, including messaging and media selection � Distribution � Leads management � Customer experience design � Retention
Slide 18: Our strategy
17 Our strategy Marketing and brand Acquisition Marketing � Produce outstanding acquisition campaigns focusing on under 40s and attracting better risks � Focus on “digital first” amplification � Increase social engagement and continue to experiment � Develop a content marketing strategy that’s scala
Slide 19: Our strategy
18 Our strategy Distribution Continue to invest heavily in the Grow our share of the over nib brand, leveraging our brand 55’s market positioning and omni-channel How capabilities to grow the category � Whitelabel relationships and our presence in the under � Other strategic partners 40’s segment. H
Slide 20: Our strategy
19 Our strategy Retention and lapse Customer retention remains a key challenge � Industry lapse rates continue to edge higher � Despite the effectiveness of our lapse initiatives, our lapse rate is higher than the industry, even after allowing for age differences Annualised Discontinued Rate (%) � S
Slide 21: WOW Factors
20 WOW Factors Going to hospital � A key customer moment of truth is going to hospital. Customers have little access to information to help them make decisions � In 2015 nib received a total of 430,000 hospital eligibility checks as well as 160,000 calls related to going to hospital � New tools are
Slide 22: Claims management
21 Claims management Claims inflation has slowed in recent times... But is this the new trend or will claims inflation revert to historical levels A numbers of claims management initiatives underway 1. Active payment integrity function – Provider profiling – Up coding – Fraud Total benefits (hospita
Slide 23: Our focus for next 12 months
22 Our focus for next 12 months Grow by Organic sales Whitelabelling Operational Benefits Give our Opportunistically attracting and excellence management customers a pursue mergers keeping reason to stay the right beyond just customers health insurance � Product design • Apia • Failure demand � Firs
Slide 24: Morning Tea
23 Morning Tea Webcast will resume shortly
Slide 25: nib New Zealand
24 nib New Zealand Rob Hennin
Slide 26: Market Overview
25 Market Overview Components of healthcare spending 83% 10.6% 5.0% 1.4% Government Individuals PHI Community health What PHI does and doesn’t cover Covered Not covered New Zealand PHI Growth Drivers Public & Private Hospital (accommodation, theatre, etc), choice of specialist � Increasing wealth an
Slide 27: Market Overview
26 Market Overview Market share (Premium Revenue) Market share (Lives covered) PHI Coverage (Percentage of population) Others 7.5% Partners Life 3.1% 35.0% Police 1.6% UniMed 4.2% nib* 1,380,013 13.6% nib 32.5% Sovereign 7.1% 1,360,013 15.7% Others 5.1% 30.0% 1,340,013 Police 2.4% 1,320,013 27.5% Un
Slide 28: Market Overview
27 Market Overview Current state What we like � Health insurance covers full health spectrum (GPs, diagnostic, pharma, specialists, hospital) � DTC opportunity to grow new to category and market � Ability to risk rate � Considerable latent demand – relative low PHI participation compared to Australi
Slide 29: Our strategy
�� 28 Our strategy Grow the Digitise our Lapse and Our Build modern business... business retention people value based across all provider network channels � Build DTC channel � We acquired a � Protect and retain � Have the right � Important cost paper-based existing business people on the effective
Slide 30: Our positioning
29 Our positioning To grow the New Zealand health insurance market and our overall share through innovative and affordable products and best in class customer service. * nib is the major sponsor of NZ Super Rugby team the Auckland Blues ��
Slide 31: Our approach to growth: Distribution
30 Our approach to growth Distribution Our strong growth ambitions are collaborated against a Sales* (% of sales) by channel multi-channel distribution strategy: Group Advisor DTC Whitelabel 100% 1. Advisor – in past 12 months have launched “best in class” 90% products and maintained strong key advi
Slide 32: Our approach to growth: Voice of customer (NPS)
31 Our approach to growth Voice of customer (NPS) Our Net Promoter Score has improved significantly since launching brand in 2013, but still much to do. � Measure and reduce ‘Failure Demand’ � Provide faultless ‘Moment of Truth’ interactions � Delivering ‘WOW’ experiences to delight customers � Bett
Slide 33: Our approach to growth: Brand
32 Our approach to growth Brand Our investment in brand and marketing is paying off Unprompted brand awareness with nib brand (unprompted brand awareness) now 100% clearly number two in market. nib Competitor A Competitor B 80% 60% 58.3% 40% 25.6% 20% 6.6% 0% 3 4 5 14 16 3 4 6 5 3 4 5 15 l-1 l-1 l-1
Slide 34: Our approach to growth: People
33 Our approach to growth People Having the ‘right people on the bus’, developing a high performance culture and leveraging Group skills and capability are at the core of our thinking and effort. Emphasis on We have great Reduce operational red communication, people leaders tape and have procedures
Slide 35: M&A – Step change with OnePath Health acquisition
34 Our approach to growth M&A – Step change with OnePath Health acquisition OnePath acquisition... we got exactly what we Policyholder growth paid for 115,000 Tower 30.0 nib nz While early days... 20.0 � Revenue on target 95,000 � Positive adviser feedback % 10.0 � No ‘shock lapse’ to date � Bancass
Slide 36: Lapse and retention
35 Our approach to growth Lapse and retention While lapse is improving (DTC), our focus is on addressing the 5 top reasons for lapse � Uncertainty regarding cover � Perceived value (Not using their cover) � Customer Service (experience) � Financial/Affordability � Offered better deal through work
Slide 37: Driving digital engagement
36 Our approach to growth Driving digital engagement Focusing on a digital first approach to improve customer engagement and satisfaction as well as generate operational efficiencies. Initiative: Status Paperless as the default Target completion June 2016 Paperless as the default Digital customer jo
Slide 38: Claims and benefit management
37 Claims and benefit management While claims inflation is trending on a lower Rolling 12 month claims inflation (nib versus industry) trajectory, a number of strategic initiatives are in the pipeline to improve affordability slow rate of 12% claims growth. 10% 8% Product design Outlier (cost Cost v
Slide 39: Premium Payback – Early Settlement Offer
38 Premium Payback – Early Settlement Offer Increasing available capital PPB Early Settlement Offer � Strong acceptance of the PPB early settlement offer campaign 1,200 Cumulative Acceptance Cumulative Cancellations 1,000 � Has resulted in the release of risk margin and 800 POLICIES increase in avai
Slide 40: Our focus for next 12 months
39 Our focus for next 12 months � Even greater focus on DTC including partners to capitalise on the opportunity � Digitise and automate our business to create greater engagement and efficiencies � Launch innovative provider network to control claims cost and achieve better value � Continue to access
Slide 41: World Nomads Group
40 World Nomads Group Michael Callaghan
Slide 42: The World Nomads Group
41 The World Nomads Group Channel Approach Partner AU Agency Channel Policies sold Australia All channels MGA Lloyd's outside AU/NZ Aust &NZ Partner Brands NZ Partner/DTC MGA Lloyd's Direct to Customer Asia DTC Distributor BUPA (DTC) Europe DTC Distributor BUPA AU/NZ Direct to UK/IRE DTC Distributor
Slide 43: The Portfolio of Brands
42 The Portfolio of Brands 1,000+ AGENCY agencies PARTNER 2m+ customers 3,000+ DIRECT online partners
Slide 44: Business structured around core capabilities
43 Business structured around core capabilities INTERNATIONAL AU AND NZ TRAVELLER UNDERWRITING TECHNOLOGY DISTRIBUTION DISTRIBUTION SERVICES World class Market leading Customer Unique product Strong acquisition position experience development, innovation strategy across online across rational price
Slide 45: A scalable, capital light business model
44 A scalable, capital light business model Australia and New Zealand Other International Markets Distribution & Selling WNG distributes travel insurance via the world nomads & Vivamos brand WNG operates as an underwriting agent of the Emergency Assist insurer and generates income and Claims Handlin
Slide 46: Business has settled under nib
45 Business has setlled under nib Minimal disruption and renewed energy NEW SCALE & RESOURCE � Group capabilities assisting WNG to scale business across various functions � Leveraging Group practices, and infrastructure – particulerly across multiple locations CULTURAL ALIGNMENT � Smooth transition
Slide 47: Business performance
46 Business performance Maiden nib contribution in line with expectations WNG Sales (Policies) 1H16* WNG Gross Written Premium by Region 300,000 295,461 290,378 Australia 278,918 2% 7% United States 200,000 2% Europe (ex. UK) 5% United Kingdom 64% 7% 100,000 New Zealand Canada 13% - Rest of World 1H
Slide 48: Our strategic priorities
47 Our strategic priorities Partner Brands INTERNATIONAL EXPANSION � Invest in world nomads brand � Local market capabilities � Explore opportunities to operate further up the value chain NEW CHANNELS ACROSS AUSTRALIA AND NZ Develop new International channels � Leveraging online brands offline (nib
Slide 49: Our focus for next 12 months
48 Our focus for next 12 months INTERNATIONAL AUSTRALIA AND NZ SHAPING OPERATIONS TO SUPPORT GROWTH Increased marketing Roll out of nib and Right people and talent investment within World Nomads across supporting international World Nomads Australian agency channel expansion Exploring new markets De
Slide 50: Capital management and APRA
49 Capital management and APRA Michelle McPherson
Slide 51: nib capital structure
50 nib capital structure nib OPERATES IN THE FOLLOWING nib’s CAPITAL MANAGEMENT SUMMARY OF SEGMENTS EACH WITH DIFFERENT APPROACH LOOKS TO ACHIEVE CAPITAL STRUCTURE CAPITAL NEEDS A BALANCE BETWEEN � arhi (APRA regulated capital � Capital management activities to � Hold a level of capital that is the
Slide 52: nib internal capital targets
51 nib internal capital targets nib health funds limited (Australian Regulated Entity) � Internal target at 31 December 2015 was 13.8% of total projected premiums for the next 12 months from any given date � The current determination by the Board with reference to the APRA capital requirements for P
Slide 53: nib internal capital targets
52 nib internal capital targets nib NZ limited (New Zealand Regulated Entity) � Internal target is 175% of the minimum solvency capital (previous target) plus NZ$10 million � The overriding objective underpinning nib nz’s capital management approach is to operate with a level of capital judged to be
Slide 54: nib debt
53 nib debt Debt arrangements 31 December 2015 Gearing and Finance Costs Partner Brands Facility Amount Drawn Lender 35.0% Finance Costs ($m) NZD 70 million NZD 70 million ANZ Gearing ratio 29.3% Maximum gearing ratio AUD 50 million AUD 35 million ANZ 16.1% 15.8% 15.6% AUD 50 million AUD 50 million
Slide 55: Questions
54 Questions
Slide 56: Appendix - nib available capital
55 Appendix - nib available capital 31 DECEMBER 2015 � At 31 December, 2015 the Group had available capital of $4.0 million $m) � Available capital determined taking into consideration the following elements Net assets 362.5 Less: nib health fund capital required (238.6) nib nz capital required (86.
Slide 57: Appendix - APRA Solvency Standards
56 Appendix - APRA Solvency Standards The Solvency Standard has the following two requirements: 1. The value of an insurer’s cash must be equal to or greater than the “cash management amount”, plus any solvency supervisory adjustment amount: – Cash has the meaning given in Australian Accounting Stan
Slide 58: Appendix - APRA Solvency Standards
57 Appendix - APRA Solvency Standards Solvency Standard Liquidity test Liquidity - Cash is not less than the sum of management plan amounts below The cash management amount is the sum of the stressed net cash outflow amount* + 1% of the central estimate of the health business revenue estimate for th
Slide 59: Appendix - APRA Capital Adequacy Standard
58 Appendix - APRA Capital Adequacy Standard The Capital Adequacy Standard (“Are the health fund’s assets large enough to ensure that it can survive a very bad year with its balance sheet intact?”) has two tests: Test 1 – quantum of assets test (see example graph below) Test 2 – concentration of ass
Slide 60: Appendix - APRA Capital Adequacy Standard
59 Appendix - APRA Capital Adequacy Standard Assets must not be less than the greater of the amounts calculated under the two tests described below Capital Adequacy Standard Quantum of Concentration Capital Management Assets Test of Assets Test Policy (CMP) The sum of: The sum of: The CMP must consi
Slide 61: Appendix - APRA Capital Adequacy Standard
60 Appendix - APRA Capital Adequacy Standard TEST 1 - QUANTUM TEST 2 - CONCENTRATION • Stressed net margin estimate1, plus Stress test amount • Stressed investment income estimate, plus (98% PoS) • Stressed other income estimate, less Capital adequacy default loss • Tax attributable (positive or neg
Slide 62: Closing remarks
61 Closing remarks Mark Fitzgibbon
Slide 63: Questions
62 Questions