NIB Holdings Ltd · ASX:NHF
NIB — H1 2010 Earnings Presentation
33 slides from NIB's earnings presentation, Feb 22, 2010
Slide 1: Half Year Results
ea alle) holdings HALF YEAR RESULTS 22 FEBRUARY
Slide 2: Highlights
Highlights For personal use only Pre-tax underwriting profit of $30.5m up 47% (1H09: $20.8m) Consolidated profit of $43 $43.1m 1m (1H09: $2 $2.1m) 1m) enhanced by stronger investment performance Operating cash in-flow of $20.1m Return on Equity (ROE) of 18.0% with strategic capital “war ches
Slide 3: Financial snapshot
Financial snapshot Change 1H10 For personal use only ($m) 1H08 1H09 1H10 v1H09 $m % Premium revenue 370 9 370.9 410 6 410.6 446 1 446.1 35 5 35.5 86 8.6 51.8 63.6 71.2 Gross margin 7.6 11.9 14.0% 15.5% 16.0% (37.9) (42.8) (40.7) Management expenses 2.1 4.9 10 2% 10.2% 10 4% 10.4% 9 1% 9.1% 13.9 20.8
Slide 4: Policyholder growth
Policyholder growth Percentage of industry growth For personal use only * nib net policyholder growth in six months to 31 December 2009 NT Growth* 31 Market share 505 QLD (1.3% ) Growth* 2,021 WA Market share 39,557 Growth* 72 (4.1%) Market share 4,745 SA (0.7%) Growth* 132 Market share 6,345 (1.4%)
Slide 5: Gross Margin
Gross Margin 1H10 iincludes l d one-off ff benefit b fit For personal use only 1H10 vs $m $ 1H08 1H09 2H09 FY09 1H10 1H09 $m % Gross underwriting result 51.8 63.6 58.4 122.0 71.2 7.6 11.9 Gross underwriting margin (%) 14.0 15.5 14.0 14.7 16.0 Premium revenue up 8.6% (or $35.5m) reflecting policyho
Slide 6: Operating Expenses (underwriting)
Operating Expenses (underwriting) L Low 1H10 managementt expense llevels l For personal use only 1H10 v 1H09 ($m) 1H08* 1H09+ 2H09+ FY09+ 1H10 $m % fav/(unfav) Employment 18.1 18.4 17.3 35.7 18.1 0.3 1.6 Marketing 8.1 8.5 8.7 17.2 7.7 0.8 9.4 IT 2.6 3.0 2.7 5.7 2.9 0.1 3.3 Occupancy 2.3 5.5 3.2 8.7
Slide 7: Investment return
Investment return St Strong contributing t ib ti factor f t in i consolidated lid t d result lt For personal use only 1H10 vs 1H08 1H09 1H10 1H09 $m % Net investment return ($m) 11.9 (13.9) 33.6 47.5 341.7 Net percentage return* (%) 5.7 (6.5) 15.9 * Net percentage return annualised. Refer Appendix –
Slide 8: Holding company and other subsidiary expenses
Holding company and other subsidiary expenses For personal use only Initiatives to reduce holding company costs paying off 1H10 vs 1H09 ($m) 1H09 1H10 $m % fav/(unfav) Share registry costs – ongoing 1.5 0.9 0.6 40.0 Share registry costs – one off 1.1 0.2 0.9 81.8 UMP Sale Facility – share registry 0
Slide 9: Profitability and performance metrics
Profitability and performance metrics Consolidated result due to strong underlying performance and For personal use only significant investment returns 1H08* 1H09 2H09 FY09 1H10 Pre-tax underwriting result ($m) 13.9 20.8 19.4 40.2 30.5 Net underwriting margin (%) 3.7 5.1 4.6 4.8 6.8 Profit before ta
Slide 10: Summary of movement June 2009 – December 2009
Summary of movement 30 June 2009 – 31 December 2009 For personal use only 75.0 2.4 18.6 60.0 47.5 45.0 43.1 ($m) 21.4 16.9 30.0 18.9 11.8 0.5 10.0 11.4 15.0 0.3 1.0 9.7 0.8 49 4.9 2.1 0.0 10
Slide 11: Capital management
Capital management For personal use only ($m) Capital at 30 June 2009, above internal prudential target of 1.4X: 131.6 On-market share buy back (0.2) 2010 interim dividend (9.9) Changes in forecast, liabilities and reserves (8.3) Profit after tax 43.1 Capital at 31 December 2009, above internal prud
Slide 12: Interim dividend
Interim dividend Franking credits remain limiting factor For personal use only (cps) FY08* 1H09* 2H09* 1H10 Dividend per share 2.1 3.0 4.4 2.0 - Ordinary O di di dividend id d 21 2.1 10 1.0 14 1.4 20 2.0 - Special divided 0.0 2.0 3.0 0.0 * Estimated ordinary to special dividend breakdown Interim d
Slide 13: Overseas & Unverified Policyholders Trust
Overseas & Unverified Policyholders Trust 120,000,000 For personal use only 100,000,000 Number of shares 80,000,000 60,000,000 40,000,000 20,000,000 0 25-Oct-07 25-Feb-08 25-Jun-08 25-Oct-08 25-Feb-09 25-Jun-09 25-Oct-09 Eligible policyholders are allocated shares out of the Trust by way of a veri
Slide 14: Balance Sheet
Balance Sheet W ll positioned Well iti d to t pursue strategic t t i investment i t t opportunities t iti For personal use only ($m) At 31 Dec 08 30 June 09 31 Dec 09 Current assets C h and Cash d cash h equivalents i l t 151.4 151 4 167.1 167 1 161.5 161 5 Financial assets at fair value through p&l
Slide 15: Cash flow
Cash flow For personal use only 1H10 vs ($m) 1H08 1H09 1H10 1H09 $m % Net cash inflow/(outflow) from operations 12.8 12.9 20.1 7.2 55.8 Net cash inflow/(outflow) from investing (17.6) (16.0) (4.8) 11.2 (70.0) Net cash inflow/(outflow) from financing 41.6 (25.7) (21.9) 3.8 (14.7) Continued improvem
Slide 16: Market outlook
Market outlook Annual Growth in National Health Expenditure and GDP For personal use only 16.0% 14.0% 12 0% 12.0% 10.0% % Growth 8.0% 6.0% 4 0% 4.0% 2.0% 0.0% -2.0% -4.0% 4 0% Jun-80 Jun-81 Jun-82 Jun-83 Jun-84 Jun-85 Jun-86 Jun-87 Jun-88 Jun-89 Jun-90 Jun-91 Jun-92 Jun-93 Jun-94 Jun-95 Jun-96 Jun-9
Slide 17: Business strategy
Business strategy For personal use only Target <40’s <40 s market segment segment, extend brand reach and improve retention to achieve above system organic growth Increase ‘share of wallet’ from customer base through policy ‘buy up’ and adjacent product d t offerings ff i Maintain net underwri
Slide 18: Key enterprise risks
Key enterprise risks For personal use only Market • Macro-economic environment • Heightened competitor activity • Claims inflation Sovereign • Premium pricing • 30% Private Health Insurance Rebate • National Health and Hospital Reform Commission Investment • Market volatility y • Surplus capit
Slide 19: Summing up and guidance
Summing up and guidance For personal use only 1H10 a pleasing result with above system growth and improved underlying profitability and strong investment returns FY10 shaping up as a positive year: • Net policyholder growth between 4-6% • Planned increased spending on organic growth as well as o
Slide 20: For personal use only
For personal use only
Slide 21: For personal use only
For personal use only
Slide 22: Policyholder growth
Policyholder growth Sales and lapse For personal use only nib 1H08 FY08 1H09 FY09 1H10 Total policyholders 350,248 365,389 375,130 384,288 393,524 - Policyholder growth rate 6.5% 11.1% 2.7% 5.2% 2.4% Total sales 32,831 67,456 24,740 50,438 25,142 - Sales rate 10.0% 10 0% 20.5% 20 5% 6.8% 6 8% 13.8%
Slide 23: Detailed income statement
Detailed income statement For personal use only 1H10 v ($m) 1H08 2H08 FY08 1H09 2H09 FY09 1H10 1H09 (%) Premium revenue 370.9 387.3 758.2 410.6 418.9 829.5 446.1 8.6 Claims expense (271.8) (279.5) (551.3) (293.4) (306.5) (599.9) (310.7) (5.9) - Hospital benefits paid (176.9) (180.8) (357.7) (201.1)
Slide 24: Claims expense - Hospital claims inflation
Claims expense Hospital claims inflation For personal use only nib Industry nib service cost nib utilisation nib drawing rate (incl RE) 25% 20% 15% 10% 5% 0% -5% -10% Jun--01 Jun--02 Jun--03 Jun--04 Jun--05 Jun--06 Jun--07 Jun--08 Jun--09 Dec--01 Dec--02 Dec--03 Dec--04 Dec--05 Dec--06 Dec--07 Dec--
Slide 25: Claims expense - Ancillary claims inflation
Claims expense Ancillary claims inflation For personal use only nib Industry nib service cost nib utilisation 25% 20% 15% 10% 5% 0% -5% -10% Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Note: industry data from 1 April
Slide 26: Investments
Investments For personal use only Annualised Investment (%) Investment Split Return 1H09 1H10 1H09 1H10 Cash 6.5 4.3 37.3 35.5 Australian fixed interest 22.5 7.2 23.2 21.5 O/s fixed interest (10.8) 25.8 15.4 16.6 Direct property 59 5.9 59 5.9 74 7.4 67 6.7 Australian shares (47.7) 64.3 6.8 8.1 O/s s
Slide 27: Capital adequacy
Capital adequacy Capital adequacy multiple remains strong For personal use only 2.5 2.00 2.03 2.0 1.88 1.86 1.72 1 64 1.64 1.61 1.50 1.51 1.5 1.44 Current internal target (1 (1.4) 4) 1.0 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 5 Dec-05 6 Dec-06 7 Dec-07 8 Dec-08 9 Dec-09 27
Slide 28: Regulatory capital requirements
Regulatory capital requirements $156.3m of surplus capital above internal target after allowing For personal use only for interim dividend Health Fund (HF) capital Group capital allocation (at 31 December 09) (at 31 December 09) Total surplus capital $156.3m 28
Slide 29: Financial results – underlying results
Financial results – underlying results Net underwriting result of $30.5m, up $9.7m or 46.6%on 1H09 For personal use only Underlying results split out investment income between: • Normalised investment income for 1H10 1H10– calculated on the basis of a 5 5.5% 5% (1H08: 6.0%) assumed return over ave
Slide 30: Data sheet – nib
Data sheet – nib For personal use only nib FY05 FY06 1H07 FY07 1H08 FY08 1H09 FY09 1H10 Total p policyholders y 290,940 302,299 312,315 328,784 350,248 365,389 375,130 , 384,288 , 393,524 , - Policyholder growth 4.2% 3.9% 3.3% 8.8% 6.5% 11.1% 2.7% 5.2% 2.4% - Market share 6.2% 6.3% 6.4% 6.6% 6.9% 7.
Slide 31: Data sheet – PHI industry
Data sheet – PHI industry By financial year intervals For personal use only FY05 FY06 FY07 FY08 FY09 PHI industry Total Policyholders 4,708,420 4,806,754 5,008,329 5,219,567 5,390,739 - Policyholder growth 0.8% 2.1% 4.2% 4.2% 3.3% Persons Covered 9,999,253 10,189,552 10,561,848 10,942,616 11,257,885
Slide 32: Disclaimer
Disclaimer For personal use only The material in this presentation is a summary of the results of nib holdings limited (nib) for the six months ended 31 December 2009 and an update on nib’s activities and is current at the date of preparation, 22 February 2010. Further details are provided in the Co
Slide 33: Half Year Results
ea alle) holdings HALF YEAR RESULTS 22 FEBRUARY