Nib Holdings Ltd · ASX:NHF
Nib — Investor Day (March 2016)
79 slides from Nib's investor day presentation, Mar 30, 2016
Slide 1: ASX announcement: 2011 nib strategy briefing and site visit
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 27 June 2011 The Manager Company Announcements Australia Securities Exchange Limited Level 4, Bridge Street SYDNEY NSW 2000 Subject: 2011 nib strategy b
Slide 2: 2011 Strategy Briefing & Site Visit
2011 Strategy Briefing & Site Visit Monday 27 June 2011
Slide 3: Managing Director & CEO Mark Fitzgibbon
Managing Director & CEO Mark Fitzgibbon
Slide 4: Business strategy
Business strategy gy Continue to grow organically through building national brand presence, targeting new to category under 40 segment (Virgin Green) and higher policyholder retention Look to emulate the success of Virgin Green in the over 55 and corporate segments Build an international busin
Slide 5: Financial overview
Financial overview nib FY07 FY08 FY09 FY10 1H11* Premium revenue ($m) 666.0 758.2 829.5 901.4 495.0 Net policyholder growth (%) 8.8 11.1 5.2 5.9 2.7 Gross margin (%) 14 3 14.3 14 7 14.7 14 7 14.7 14 8 14.8 16 4 16.4 Management expenses (%) 10.7 10.3 9.9 9.6 8.51 Net margin (%) 3.6 44 4.4 48 4.8 52 5
Slide 6: Some key issues
Some key issues Means testing 30% PHI Rebate Risk equalisation and premium price control Competitor C tit activity ti it and d emergence off comparator t sites it Industry structure and consolidation International business Capital management 5
Slide 7: Organic Growth
Organic Growth Rhod McKensey – Chief Marketing Officer J James B Barr – Group G Marketing M k ti Manager M
Slide 8: Agenda
Agenda Private health insurance market Our marketing strategy and approach Emerging trends and how we’re responding 7
Slide 9: Private Health Insurance
Private Health Insurance Heavily regulated Grudge purchase – perceived lack of value Like bottled water and Pay TV TV, the biggest competitor is a free alternative – in our case Medicare Commoditised product – but offerings have evolved to add complexity to make comparison shopping difficult
Slide 10: Industry growth has rebounded but remains seasonal
Industry growth has rebounded but remains seasonall Industry net policyholder growth by state 60,000 50,000 40 000 40,000 WA 30,000 VIC 20,000 , QLD NSW 10,000 ‐ Source: PHIAC During the GFC industry growth slowed from around 50,000 policies per quarter to around 30,000 policies per quarter, more
Slide 11: nib continues to grow well above system
nib continues to grow well above system FY11 to 31 Policyholder growth FY07 FY08 FY09 FY10 March 2011 nib 26,485 36,605 18,899 22,641 15,105 Industry 201,575 211,238 171,172 158,599 112,974 nib (%) 8.8 11 1 11.1 52 5.2 59 5.9 37 3.7 Industry (%) 4.2 4.2 3.3 2.9 2.0 % of growth attributed to nib (%)
Slide 12: Estimated industry advertising expenditure continues to increase
Estimated industry advertising expenditure continues to increase 120 Estimated industry advertising spend nib HCF/MU Bupa/MBF Medibank/AHM HBF iSelect Other 100 80 ($m) 60 40 20 0 FY07 FY08 FY09 FY10 FY11F Source: Neilsen Adquest 2011 & nib analysis 11
Slide 13: Sponsorships continue to play an important role in building our brand awareness
Sponsorships continue to play an important role in building our brand awareness nib brand Exposure by Property 12 Month Comparison (12 months to 30 April) May 08 to April 09 May 09 to April 10 May 10 to April 11 8,000,000 8.0 7,000,000 7 000 000 7.0 6,000,000 6.0 ure ($m) 5,000,000 5.0 Brand Exposu
Slide 14: Our marketing strategy
Our marketing strategy Strategy Focus on the low risk under 40 segment in NSW, VIC, QLD and WA To change the industry dynamics through innovation & technology Emulate the success of Virgin Green in the over 55s segment (Young At Heart) and corporate segments Tactics Leverage marketing invest
Slide 15: Our share of growth in our target segment remains strong
Our share of g growth in our target g segment g remains strong FY11 to 31 20-39 Hospital Persons Covered FY07 FY08 FY09 FY10 March 2011 nib 20,783 30,290 12,691 15,180 10,385 Industry 111,697 150,585 49,720 48,830 43,504 nib (%) 12.4 16.1 5.8 6.6 4.2 Industry (%) 5.4 6.9 2.2 2.1 1.8 % of growth attr
Slide 16: Our sales from each channel have similar profiles
Our sales from each channel have similar profiles p Switchers versus New to PHI Switchers In New to PHI 80% There is a greater proportion 60% of sales via the web to lower % of sales value products 40% The website out performs 20% other th channels h l iin sales l tto th the 0% 20-34 segment CCC
Slide 17: Growth in QLD and VIC remains strong. WA is building slowly
Growth in QLD and VIC remains strong. WA is building slowly nib net policyholder growth by state 9,000 8,000 7,000 6,000 5,000 WA 4,000 VIC 3,000 QLD 2,000 NSW 1,000 ‐ ‐1,000 Source: nib Significant inroads have been made into Victoria and Queensland, with traction now starting to build in Western
Slide 18: ROI on organic growth remains attractive
ROI on organic growth remains attractive nib policyholder cost per acquisition $1,200 NSW VIC QLD WA onths) quisition cost per ssale (rolling 12 mo $1 000 $1,000 $800 $600 $400 $200 $ Acq $0 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Source: nib In NSW, QLD & VIC our cost to acquire c
Slide 19: Policyholder sales remain consistent with expectations
Policyholder sales remain consistent with expectations FY11 to 31 nib FY07 FY08 FY09 FY10 May 2011 Total sales 49,757 67,456 50,438 56,762 52,332 % of new sales “under under 40” 40 target segment 78 5 78.5 79 2 79.2 78 7 78.7 77 4 77.4 77 7 77.7 % of new sales outside core state of NSW/ACT 32.3 44.0
Slide 20: Despite heightened competitor activity our lapse rate remains stable
Despite heightened competitor activity our lapse rate remains stable FY11 to 31 Lapse (nib) FY07 FY08 FY09 FY10 May 2011 Lapse rate (%) 7.7 9.4 8.6 8.9 9.0* Total lapse 23,272 30,851 31,539 34,122 33,514 “U d 40 “Under 40s”” segmentt (%) 62 8 62.8 62 2 62.2 62 4 62.4 62 4 62.4 62 8 62.8 Outside NSW/
Slide 21: Forced migration has so far been the only meaningful migration tactic
Forced migration has so far been the only meaningful migration tactic Forced Migrations PHI Migration g $550,000 9,000 Gross profit from monthly migrations (LHS) $450,000 8,000 Monthly upgrades (RHS) Gross profitt from monthly miigrations migrations Monthly downgrades (RHS) migrated 7,000 $350,000 6
Slide 22: Emerging trends and how we're reacting
Emerging trends and how we’re reacting Switch in marketing strategy from our competitors from brand to direct response – heavy use of offers Rise of comparison shopping and the growing role of online brokers Change in media consumption – particularly mobile and secondary channels Consumer ex
Slide 23: Heavy use of offers in the category
Heavy use of offers in the category 22
Slide 24: Consumer expectation of free value adds
Consumer expectation of free value adds Illustrrative purrposes only ative purp Illustra nly poses on Through innovation nib is developing a search engine (Whitecoat) empowering customers by enabling them to compare health specialists like dentists and physios The nib mobile site and iPhone App
Slide 25: The rise of comparison shopping in health insurance
The rise of comparison shopping in health insurance 24
Slide 26: Growing role of online brokers
Growing role of online brokers We believe it is important to maintain a presence across all online brokers brokers, not just domestic business, but international workers and international students as well 25
Slide 27: nib has reacted to shifting TV audiences
nib has reacted to shifting g TV audiences % Exp Share on Secondary Channels (FMM Database) 40% % Exp p nib 35% % Audience Share on New Channels 30% 25% % share) 20% (% 15% 10% 5% 0% Source: OzTam & Faulkner Media As the audience has increased across the secondary TV channels nib has redirected sh
Slide 28: The growing use of mobile
The g growing g use of mobile % of use Source: Google Consumers are search on their mobile phone commuting to work, during lunch and watching TV at night 27
Slide 29: In summary
In summary Industry growth has slowed but nib is increasing our share We continue to perform strongly in the 20-39 target segment Emulate the success of 20-39 20 39 segment in the over 55s (Young At Heart) and corporate segments Media consumption has changed rapidly in recent time We’ve ad
Slide 30: Claims Inflation & Operational Efficiencies
Claims Inflation & Operational Efficiencies Melanie Kneale – Chief Operating & Technology Officer Daryl Bull – Policy Administration & Claims Manager
Slide 31: Agenda
Agenda Claims and Policy Admin in Context – Why is it such a key focus? How is the cost of claims changing? How is nib responding? p g How are we reducing the cost of handling claims and administering policies? How are we positioned for scalability and integration of new businesses? 30
Slide 32: Claims and policy administration in context
Cl i Claims and d policy li administration d i i t ti in i context t t– Why is it such a key focus? 31
Slide 33: Our claims expense is significant and constantly increasing
Our claims expense is significant and constantly increasing hence the heightened and ongoing focus Approximately $800m paid in claims during CY10 (including risk equalisation) Average SEU drawing rate inflation for the last 3 years of 3 - 4% Approximately 240,000 claims are processed per month
Slide 34: Policy administration has a key financial impact
Policy administration has a key financial impact In the last 12 months o over er 203 203,000 000 polic policy administration items ha have e been received and processed FY11 revenue obtained from the Federal Government Rebate will be approximately $300 million FY11 revenue from LHC loadings wi
Slide 35: How is the cost of claims changing?
How is the cost of claims changing? 34
Slide 36: Overall claims inflation trends are in line with growth in revenue
Overall claims inflation trends are in line with growth in revenue Drawing Rate Inflation per SRU - All Products Hospital Ancillary Total Total incl. Risk Equalisation Revenue 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Source: nib
Slide 37: Service cost has been steady and utilisation is affected by customer growth
Service cost has been steady and utilisation is effected by relative customer growth Total hospital inflation Utilisation Costs Drwrt Exposure 12.0% 8 0% 8.0% 4.0% 0.0% -4.0% -8.0% Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Source: nib Service cost i
Slide 38: Disease profiles and costs are changing - Cancer a case in point
Looking forward, disease profiles and costs are changing as lifestyles deteriorate and interventions improve - Cancer is a perfect case in point Cancer Incidence and Prevalence 2003 - 2016 Incidence Prevalence 20000 15000 Incidents 10000 5000 0 2003 2006 2011 2016 Source: : HNE Health Area Cancer Se
Slide 39: Key costs we are managing
Key costs we are managing Nursing g wages g at 50% % of operating p g costs Prostheses Hospital service expansion costs – how they are passed on Tax status of catholic/ religious hospitals 38
Slide 40: How is nib responding?
How is nib responding? It is critical that we proactively focus on the drivers of utilisation and service cost - Ongoing prioritisation of the big ticket items we can influence - - A watching brief on those initiatives we have already implemented - - Analysis of future emerging trends - Provider pro
Slide 41: Savings shown through provider profiling results
We are g getting g traction and seeing g savings g as shown through our provider profiling results Mailings Number Savings FY to date Possible Self Treating BAU* as at Jan 11 262 (Dec 09) $13,00 P Possible ibl SSelflf T Treating i 284 (Sep (S 10) $19 000 $19,000 Dentists BAU* as at Jan 11 416 (Dec 0
Slide 42: Service cost controlled through contracting with top hospital groups
Our service cost is largely g y controlled through g our contracting with the top hospital groups O focus Our f going i forward: f d Longer term contracts More strategic relationships Reducing unwarranted variation Trialling innovative contracting models 41
Slide 43: How are we reducing the cost of handling claims?
How are we reducing the cost of handling claims and administering policies? 42
Slide 44: Reducing cost and increasing ease for the customer
We have increasingly focused on reducing cost and increasing ease for the customer At th the point i t off service i Customer self service Automation and STP at receipt < 2001 2001 2004 2005 2006 2007 2008 2009 2010 2011 Over the Counter I-soft & Healthstream Mobile Claims Self Service Online
Slide 45: Our current inbound receipt of claims
Our current inbound receipt of claims Customer Provider HICAPS Online / Retail Tele Mail Eclipse & Claims & IBA Mobile Claiming Network Claiming HEALTHStream Thelma Express 1.8m 53,000 247,000 58,000 562,000 229,000 (Customer 60.5% 1.8% 8.5% 2.0% 19.3% 8% S lf Service) Self S i ) (59.2% FY10) (1.4%
Slide 46: Automation of inbound non claims paperwork is well underway
Automation of inbound non claims paperwork is well underway Customer Student Federal Cancellation Support Dependant Policy Changes Portability Rebates* Direct Credit* of policies at Activities Registration* (10,000) Checks (38,000) (13,000) other funds (106,000) (9,000) (16,000) (10,000) WHICS QA *
Slide 47: The results
The results Efficiency gains has resulted in reduction in FTE numbers from 75 in 2008 to 60 in May 2011 Healthstream process guarantees 30% savings off previous unit processing cost 46
Slide 48: Positioned for scalability and integration of new businesses
How are we positioned for scalability and integration of new businesses? 47
Slide 49: Our systems are scalable to handle new business lines
Our systems are scalable to be able to handle new business lines WHICS developments d l t will ill supportt student t d t and d visitors i it progressively i l b by JJuly l 2012 and has full scalability Move of IMAN to common health insurance administration/claims processing platform has commenc
Slide 50: Corporate & International Business
Corporate & International Business Matt Henderson – Group Executive Corporate & International Business
Slide 51: Introduction
Introduction nib are building International business around temporary migrant workers, overseas students and other international opportunities that arise in both corporate and retail markets Acquisitions like IMAN are a key component in revenue and earnings ambitions beyond the domestic business
Slide 52: International business strategy FY11 - FY14
International business strategy gy FY11 - FY14 Segment and understand the direct and indirect market segments in both retail and corporate Design and price new products, to distribute, and promote to each core segment according to the individual characteristics Build capability with a new Inte
Slide 53: International workers market share and target markets
International workers market share and target markets Market share (FY11) Target markets Retail Onshore Retail Offshore 4% - Online distribution direct or via - Online distribution via SEM 12% SEM - International based Migration Medibank - Referral Partnerships Networks BUPA - Local Migration agents
Slide 54: International workers - supply & demand
International workers - supply & demand Source: DIAC 2010 Unpublished p 53
Slide 55: Corporate business – target markets
Corporate business – target markets Resources Public Service & Ministries Healthcare Professional - Subsidised 54
Slide 56: International student target markets
International student target g markets Sponsored students Education institutions Retail student market Migration agents 55
Slide 57: Whitecoat
Whitecoat Powered by nib for all Australians Adam Novak – Marketing Communications Manager
Slide 58: Whitecoat: A unique point of difference
Whitecoat A unique point of difference A new online service being d developed l dbby nib ib th thatt will ill allow ll allll Australians to search and compare healthcare specialists poses onlly poses only Will feature thousands of healthcare specialists, customer ative purp Illustrattive purp re
Slide 59: Whitecoat: Benefits to nib
Whitecoat Benefits to nib – a consumer champion Empowering consumers to be able to make more informed decisions about their healthcare Improving nib’s brand awareness and reinforcing our oses onlyy brand positioning of value for money and simplicity Reduction in customer churn due to greater c
Slide 60: The mobile web@nib
The mobile web@nib Adam Hatfield – ecommerce and CRM Manager
Slide 61: Why Mobile?
Why y Mobile? Predicted that there will be more mobile internet users than desktop users Predicted Global Internet Users by 2013 2500 There are now 6.7b 2000 mobile devices Internet Ussers (MM) worldwide 1500 1 in 5 people own a 1000 smartphone - Global last yyear it was 1 in 10 500 G An opp
Slide 62: Getting some health insurance. You guys
Getting some health insurance. You guys have any recommendations? Looking at NIB. They have an iPhone app so they're winning already. ;) 17 hours ago via TweetDeck {¥ Favorite t2 Retweet © Reply nib
Slide 63: Mobile – where are we now?
Mobile – where are we now? June 2010 saw the introduction of a new channel both for nib customer service and acquisition Mobile traffic is now approximately 10% of all traffic to nib.com.au 2,500 mobile claims to date 2,300 mobile quotes in the last four months 31,000 people have downloade
Slide 64: Which mobile platform?
Which mobile platform? p We live in an iOS world … for now! • 75% of visitors are on an iPhone / iPod touch • 15% are on an iPad • Only y 7% of visitors use Android Android adoption will increase, but how quickly? • We aren’t seeing the level of adoption shown in the US…. Yet! 63
Slide 65: Mobile – where next?
Mobile – where next? Continue to bed down functionality in our mobile offering • Remaining benefits in mobile online services New version of iPhone app • Build claiming into the app so you can take a photo of a receipt and submit • Include Whitecoat search • Explore the development of an android
Slide 66: Social Media
Social Media nib has presence across • Twitter • Facebook • Youtube Used as a communication platform and listening tool Social media integration being built into all new online properties such as Whitecoat 65
Slide 67: Market intelligence & product innovation
Market intelligence & product innovation Alex Garas – Group Manager Products & Market Intelligence
Slide 68: Agenda
Agenda Customer insights – continued growth of the nib brand g Targeting the Young At Heart (YAH) market - over 55 years of age Upcoming product innovation – continuous improvement and value l creation ti 67
Slide 69: Customer insights
Customer insights g 79% of Australians are aware of the nib brand (in NSW 92%) • This Thi iis ahead h d off HBA (32%) (32%), HCF (59%) and d on par with ith MBF(80%) The nib brand goes from strength to strength: • 69% sayy nib is the brand leading g the wayy – ahead of all competitors, p , inclu
Slide 70: nib ads continue to drive growth
nib ads continue to drive growth 47% Australians recalled the ad 83% of those recalling the ad nationally knew it was nib 36% said the ad made them more likely to consider nib Advertising Impact (%) Medibank MBF HBF iSelect Recognise TV ad 12 47 55 42 Correct named brand (of those recognise of ad) 5
Slide 71: Building the nib brand in WA
Building the nib brand in WA Since August 2009 awareness of the nib brand has increased from 34% to 43% View of nib as a brand that is leading the way has increased from 36% to 47% nib is the brand most considered to be price competitive and suited to young people The Eagles (2010) – nib Stadi
Slide 72: Over 55s – why?
Over 55s – why? Only half of Australians over 55 have health insurance but in our community rated environment PHI is incredible value for this age group Risk Equalisation helps ensure these customers are profitable Given this cohort are likely to have high net worth but low disposable income,
Slide 73: Other nib product innovations
Other nib product innovations Launched Development Launched Comments Expansion to nib’s ‘Life’ product portfolio offered in partnership with nib Funeral Plan October 2010 TOWER. IInternational t ti l Students St d t Unique U i to t Australian A t li market.k t Fi Firstt product d t tto cover allll m
Slide 74: Chief Financial Officer & Deputy CEO
Chief Financial Officer & Deputy CEO Michelle McPherson
Slide 75: FY11 will be another positive result
FY11 will be another positive result Health Insurance Business (HIB) net policyholder growth on track for 5.5% - 6.0% nib ib on track t k tot achieve hi FY11 nett underwriting d iti guidance id off FY11 nett pre-tax t underwriting profit of $55 - $58 million (net underwriting margin 5.4% - 5.7%)
Slide 76: YTD results have nib on track to achieve FY11 guidance
YTD results have nib on track to achieve FY11 guidance id with ith some potential t ti l for f upside nib on track to achieve FY11 net underwriting guidance of FY11 net pre- tax underwriting profit of $55 - $58 million (net underwriting margin 5.4% - 5.7%)) with some ppotential for upside. p nib’s
Slide 77: FY11 Other Income and Other Expenses impacted by non recurring items
FY11 Other Income and Other Expenses impacted by non recurring items Other Income • 2H11 other income will include one-off receipt of remaining funds in Overseas and Unverified Policyholders Trust of approximately $3.5 million Other Expenses • Additional non-recurring IMAN integration costs in 2
Slide 78: Investments on track to provide solid FY11 result
Investments on track to p provide solid FY11 result nib transitioned to MLC products as its investment asset consultant (fully effective O t b 2010) October All surplus capital above internal prudential requirement (1.3x) is held in 100% cash Planned capital return of $75 million in July 2011
Slide 79: 2011 Strategy Briefing & Site Visit
2011 Strategy Briefing & Site Visit Monday 27 June 2011