Medibank Private Ltd. · ASX:MPL
Medibank Private — H1 2016 Earnings Presentation
36 slides from Medibank Private's earnings presentation, Feb 19, 2016
Slide 1: 1H16 Results Investor Presentation
19 February 2016 Investor presentation George Savvides - Managing Director Paul Koppelman - Chief Financial Officer 1H16 RESULTS
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: Executive Summary
EXECUTIVE SUMMARY 3
Slide 4: 1H16 Result Summary
1H16 RESULT SUMMARY NPAT up strongly driven by continued success of health cost leadership strategy • Group net profit after tax (NPAT) $227.6m up from $143.8m in 1H15 GROUP NPAT • Health Insurance: 58.8% increase in operating profit to $271.7m from $227.6m $171.1m in 1H15, reflecting continued focu
Slide 5: Group Financial Summary
GROUP FINANCIAL SUMMARY Six months ended 31 Dec – ($m) 1H16 1H15 Change (%) Health Insurance premium revenue 3,080.0 2,943.3 4.6 Complementary Services revenue 300.6 326.4 (7.9) Revenue 3,380.6 3,269.7 3.4 Health Insurance operating profit 271.7 171.1 58.8 Complementary Services operating profit 9.2
Slide 6: Health Insurance
HEALTH INSURANCE 6
Slide 7: Health Insurance Result
HEALTH INSURANCE RESULT Successful health benefit claims management driving operating margin improvement • Premium revenue growth continued to Six months ended 31 Dec – 1H16 1H15 Change % moderate due to: ($m) o Slowing market growth Premium revenue 3,080.0 2,943.3 4.6 o Medibank-specific product Ne
Slide 8: Medibank Is Driving Profitable Growth
MEDIBANK IS DRIVING PROFITABLE GROWTH Drivers of Health Insurance result 1H16 Health Insurance metrics 1H16 Health Insurance operating profit 1 Premium revenue growth • Population growth and participation rate $3,080.0m $271.7m $(257.2)m Premium revenue growth of 8.8% • Policyholder retention and gr
Slide 9: Premium Revenue and Policyholders
PREMIUM REVENUE AND POLICYHOLDERS Growth trajectory moderated by a slowing market, product management and sales mix movements • Challenging industry conditions, Six months ended 31 Dec 1H16 1H15 Change including slowing industry growth Premium revenue ($m) 3,080.0 2,943.3 4.6% • Volumes down margina
Slide 10: Health Benefit Claims
HEALTH BENEFIT CLAIMS Continued margin improvement driven by product management and payment integrity program • Health benefit claims management program continues to drive cost savings Six months ended 31 Dec – 1H16 1H15 Change (%) ($m) • Product management • New sales mix changes Claims expense (2,
Slide 11: Health Benefit Claims
HEALTH BENEFIT CLAIMS Continued margin improvement driven by product management and payment integrity program Net claims expense (incl. risk equalisation) Indicative composition and movement in dollar value vs. 1H15 Dental +1% Hospital Extras 10% Optical -1% $2.5bn $2.6bn 6% Extras -0.4% Physiothera
Slide 12: Management Expenses
MANAGEMENT EXPENSES Continued underlying momentum and reinvestment in capability Six months ended 31 Dec – • MER up 30bps to 8.4% due to timing ($m) 1H16 1H15 Change (%) differences and continued investment in enhancing capability Premium revenue 3,080.0 2,943.3 4.6 o Management expenses in FY15 mor
Slide 13: Complementary Services
COMPLEMENTARY SERVICES 13
Slide 14: Complementary Services
COMPLEMENTARY SERVICES Profit improvement reflects changes in response to the Company’s strategic review • Refocused Complementary Services business delivering healthy profit growth Six months ended 31 Dec – ($m) 1H16 1H15 Change (%) • Following completion of strategic Revenue 300.6 326.4 (7.9) revi
Slide 15: Investment Portfolio & Capital
INVESTMENT PORTFOLIO & CAPITAL 15
Slide 16: Investment Portfolio
INVESTMENT PORTFOLIO Target asset allocation remains unchanged Target asset allocation unchanged Foreign currency exposures fully at 75% defensive, 25% growth hedged (except for International equities – 50% hedged) As at 31 Dec 2015 Balance ($m) Portfolio composition Target asset allocation Australi
Slide 17: Investment Income
INVESTMENT INCOME Investment returns affected by lower equity markets and interest rates • Investment income below 1H15 due Six months ended 31 Dec – ($m) 1H16 1H15 Change (%) to lower investment markets across the board Average monthly balance: Growth 567.4 461.7 22.9 o Growth assets down due to we
Slide 18: Capital
CAPITAL Health Insurance capital within Medibank target range of 12-14% ($m) 31 Dec 2015 30 Jun 2015 Total equity 1,525.7 1,442.0 Less: Intangible and illiquid assets (397.0) (393.7) Total tangible and liquid assets 1,128.7 1,048.3 Less: Allowance for declared but unpaid dividends (137.7) (146.0) Le
Slide 19: Dividend
DIVIDEND Full year target payout ratio 70-75% • Interim dividend of 5.0 cents per share fully franked • Full year target payout ratio of 70-75% of underlying NPAT confirmed 5.0 cents per share • Interim payout ratio of 64% of underlying NPAT1 fully franked o Lower than full year target ratio due to
Slide 20: Other Financial Information
OTHER FINANCIAL INFORMATION 20
Slide 21: Financial Summary: Group
FINANCIAL SUMMARY: GROUP Corporate overheads, other expenses, tax • Increase in corporate overheads Six months ended 31 Dec – ($m) 1H16 1H15 Change (%) mainly due to the full period impact of costs associated with being a listed company Segment operating profit 280.9 178.3 57.5 Corporate overheads (
Slide 22: Balance Sheet
BALANCE SHEET Strong, debt free balance sheet Change vs. 31 ($m) 31 Dec 2015 30 Jun 2015 31 Dec 2014 Dec 2014 (%) Cash and cash equivalents 456.3 408.7 470.8 (3.1) Financial assets at fair value 1,702.1 1,971.8 1,425.5 19.4 through profit or loss • Seasonal prepayments mean Trade and other receivabl
Slide 23: Cash Flow
CASH FLOW Heavy skew to second half Six months ended 31 Dec – ($m) 1H16 1H15 Change (%) • Change in operating assets Operating profit1 267.3 167.5 59.6 and liabilities typically negative Changes in working capital2 (107.6) (53.7) (100.4) in first half and positive in Customer acquisition costs 2.5 (
Slide 24: Strategy & Outlook
STRATEGY & OUTLOOK 24
Slide 25: Regulatory Reform
REGULATORY REFORM Momentum building for changes to address healthcare affordability and quality Estimated timeline of regulatory reviews (progressive implementation of reforms over subsequent 2–3 years) PHI review Medicare compliance review MBS review Primary Health Care Advisory Group Sep 15 Dec 15
Slide 26: PHI Review
PHI REVIEW Seven reforms for a more consumer-centred and sustainable health system MPL submission built around 3 consumer-centred guiding principles Total healthcare savings of up to $3bn per annum identified across the industry Potential reduction of Transparency Affordability Value premiums for in
Slide 27: Our Strategy
OUR STRATEGY Sustaining profitable growth Focus areas • Product performance • Marketing & sales effectiveness • Health cost leadership 27
Slide 28: High Performance Health Insurance
HIGH PERFORMANCE HEALTH INSURANCE Optimising the current business: short to medium term focus Focus areas Strategic programs Key 1H16 actions • Introducing new products and benefits to drive • Resubmitted 2016 premium rate change Product growth • Addressed underperforming products (Medibank and ahm)
Slide 29: Marketing & Sales Effectiveness
MARKETING & SALES EFFECTIVENESS Medibank brand refresh IMPACT REACH ACQUISITION (PROSPECTS) ENGAGEMENT 29
Slide 30: Health Insurance Outlook
HEALTH INSURANCE OUTLOOK Updated outlook from 22 January 2016 confirmed Health Insurance financial targets for FY16: • Premium revenue growth between 4.5% and 5.0% • Management expense ratio of 8.5% • Operating profit above $470m These targets anticipate that the second half operating profit will be
Slide 31: 1H16 Results Q&A
31 &A 1H16 Results
Slide 32: Appendix
32 APPENDIX 1H16 Results
Slide 33: Group Financial Summary: Half by Half
GROUP FINANCIAL SUMMARY: HALF BY HALF ($m) 1H16 2H15 1H15 Revenue 3,380.6 3,306.3 3,269.7 Health Insurance operating profit 271.7 161.1 171.1 Complementary Services operating profit 9.2 7.0 7.2 Segment operating profit 280.9 168.2 178.3 Corporate overheads (13.6) (31.3) (10.8) Total operating profit
Slide 34: Health Insurance Result: Half by Half
HEALTH INSURANCE RESULT: HALF BY HALF ($m) 1H16 2H15 1H15 Premium revenue 3,080.0 2,991.5 2,943.3 Net claims expense (2,551.1) (2,557.7) (2,535.2) (incl. risk equalisation) Gross profit 528.9 433.7 408.1 Management expenses (257.2) (272.6) (237.0) Operating profit 271.7 161.1 171.1 Gross margin1 (%)
Slide 35: Group P&L Reconciliation: Pro Forma to Statutory
GROUP P&L RECONCILIATION: PRO FORMA TO STATUTORY Statutory Pro forma1 Change (%) ($m) 1H16 1H15 1H15 Vs. Statutory Vs. Pro forma Health Insurance revenue 3,080.0 2,943.3 2,943.3 4.6 4.6 Complementary Services revenue 300.6 326.4 326.4 (7.9) (7.9) Revenue 3,380.6 3,269.7 3,269.7 3.4 3.4 Health Insura
Slide 36: Glossary
GLOSSARY 1H Six months ended/ending 31 December 20XX The primary person who is insured under a private health insurance policy (other than in relation to 2H Six months ended/ending 30 June 20XX Policyholder overseas students or visitors), who is not a The contract between the Commonwealth and depend