Nib Holdings Ltd · ASX:NHF
Nib — FY2017 Earnings Presentation
29 slides from Nib's earnings presentation, Aug 21, 2017
Slide 1: nib holdings FY17 results presentation, August 2017
plat! 21 August 2017 nib "
Slide 2: Disclaimer
Disclaimer The material in this presentation is a summary of the results of nib holdings limited (nib) for the 12 months ended 30 June 2017 and an update on nib’s activities and is current at the date of preparation, 21 August 2017. Further details are provided in nib’s full year accounts and result
Slide 3: Mark Fitzgibbon, Chief Executive Officer & Managing Director
Mark Fitzgibbon Chief Executive Officer & Managing Director 3
Slide 4: FY17 Group Financial Highlights
FY17 Group Financial Highlights Total Underlying Revenue UOP1 Net Investment Income NPAT $2,004.5m $153.7m $28.6m $120.2m 7.0% 16.4% 69.2% 30.9% Statutory Operating Profit2 $150.6m ( 24.7%) Statutory EPS Non-arhi contribution to Net Promoter Score* ROIC3 Group earnings 27.2cps 30.4% 23.2% 22.7% 28.3
Slide 5: FY17 Group UOP Snapshot
FY17 Group UOP Snapshot ($m) FY17 FY16 Change Australian Residents Health Insurance (arhi) 107.0 94.5 13.2% International (Inbound) Health Insurance (iihi) 25.4 17.2 47.7% nib New Zealand (nib NZ) 23.5 17.3 35.8% World Nomads Group (WNG) 7.5 9.7 (22.7)% nib Options1 (3.3) (2.6) (26.9)% Other2 (6.4)
Slide 6: Strong Shareholder Return
Strong Shareholder Return Full Year Dividends Total Shareholder Return (cps) (%) Ord inary Spe cia l nib ASX200 61.4 48.6 9.0 44.3 30.0 19.0 21.6 14.75 19.7 11.0 11.5 15.2 13.8 10.0 6.1 (0.5) FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17 • FY17 full year dividend of 19.0cps fully franked, includ
Slide 7: Michelle McPherson, Chief Financial Officer & Deputy CEO
Michelle McPherson Chief Financial Officer & Deputy CEO 7
Slide 8: FY17 Group Underlying Revenue
FY17 Group Underlying Revenue Total Group underlying revenue by segment ($m) Total Group underlying revenue ▲ 7.0% due to: 2,100.0 $2,004.5m • arhi premium revenue of $1.7bn (▲ 6.4%), a strong result in $1,873.1m a weak market. Accounted for 83.3% of total Group 1,800.0 revenue. • international (inb
Slide 9: FY17 Group UOP
FY17 Group UOP Group UOP by segment Group UOP ▲16.4% due to: ($m) • arhi policyholder growth and above-target net margin of 170.0 $153.7m 6.4% with UOP of $107.0m (▲13.2%). 150.0 • Adjacent businesses accounted for 30.4% of Group UOP $132.0m (FY16: 28.4%) on the back of: 130.0 • Margin turnaround in
Slide 10: FY17 arhi Performance
FY17 arhi Performance FY17 FY16 Change • Delivered almost 4-times industry net policyholder growth, Policyholder growth (%) 3.8 3.8 0bps accounting for more than 30% of industry growth aided by our multi-channel distribution strategy. Lapse (%)1 13.5 12.6 90bps • Weak market conditions and affordabi
Slide 11: FY17 iihi Performance
FY17 iihi Performance FY17 FY16 Change • Impressive earnings result, accounting for 16.5% of Policyholder growth (%) 28.5 28.0 50bps Group UOP, driven by sales volume and mix as well Premium revenue ($m) 74.8 76.8 (2.6)% as cessation of unprofitable group student agreement Claims expense ($m) (28.0)
Slide 12: FY17 NZ Performance
FY17 NZ Performance FY17 FY16 Change • November 2017 marks 5 years since acquisition with business delivering above stated earnings targets. Policyholder growth (%) (5.2) 25.81 (3,100)bps • DTC accounted for more than half of sales, with 70% of Premium revenue ($m) 199.3 173.5 14.9% these made onlin
Slide 13: FY17 WNG Performance
FY17 WNG Performance FY17 FY161 (11 month result) Change • UOP in line with expectations and includes planned investment in growth opportunities. Policy sales 642,471 534,932 20.1% • Domestic sales market improvement in 2H17 Gross written premium ($m)2 131.8 112.2 17.5% resulted in more than 55% of
Slide 14: Investments, Gearing & Capital
Investments, Gearing & Capital FY17 FY16 Change • Net investment income an exceptional result and Net investment income ($m) 28.6 16.9 69.2% above internal benchmarks. Finance costs ($m) (4.8) (5.3) (9.4)% • Finance costs reflect low interest rate environment. Available capital above internal target
Slide 15: Mark Fitzgibbon, Chief Executive Officer & Managing Director
Mark Fitzgibbon Chief Executive Officer & Managing Director 15
Slide 16: Market Outlook
Market Outlook arhi • Weak growth and downgrading pressures • Margin pressures around claims inflation and pricing • Customer cost and performance transparency (e.g. Whitecoat) • Further industry consolidation ??? • Demand for mobile access and digital age healthcare products and services • Outsourc
Slide 17: Market Outlook
Market Outlook iihi nib NZ • Strong market growth in both workers and • Weak growth and heightened competition students • Favourable macro-economic conditions • Attractive margins • Industry consolidation and adjacent • International expansion possibilities opportunities WNG Other adjacent • Strong
Slide 18: Potential business expansion
Potential business expansion • Currently exploring a proposed collaboration with Chinese pharmaceutical company Tasly Holding Group. • Plan to sell “critical illness” lump sum product in Jing-Jin-Ji area (which includes Tianjin, Beijing City and Hebei Province, population approximately 100 million)
Slide 19: Our Focus
Our Focus • Pursue arhi organic net growth in 4-5% range with net margins 5-6% via market insight and multi-channel distribution. • Increase investment in adjacent businesses and their contribution to Group earnings towards 50% of total. • Expand the value proposition for consumers through knowledge
Slide 20: FY18 Guidance
FY18 Guidance ($m) FY18 (Guidance) • FY18 UOP forecast to be at least $150.0m (statutory of at least operating profit of at least $141.0m) reflecting: Statutory operating profit 141.0 • Reduced arhi net margin to within target range One-off transaction and M&A costs 2.3 • New business and technology
Slide 21: Questions and Answers
Questions and Answers
Slide 22: Appendix
Appendix
Slide 23: Policyholder & Other Data
Policyholder & Other Data (Underwriting Segments) nib Group FY17 FY16 Total persons covered 1,391,509 1,346,195 Total policyholders 767,672 726,710 − Australian Residents Health Insurance 549,602 529,398 − International (Inbound) Health Insurance 118,149 91,918 − nib New Zealand 99,921 105,394 Emplo
Slide 24: Detailed Income Statement (UOP)
Detailed Income Statement (UOP) ($m) FY17 FY16 Change Net premium revenue1 1,943.1 1,818.7 6.8% - arhi 1,669.0 1,568.4 6.4% - iihi 74.8 76.8 (2.6)% - nibnz 199.3 173.5 14.9% Net claims expense1 (1,343.8) (1,288.0) 4.3% - Hospital claims paid (arhi) (842.3) (782.3) 7.7% - Ancillary claims paid (arhi)
Slide 25: Underlying to Statutory Operating Profit
Underlying to Statutory Operating Profit ($m) FY17 FY16 Change UOP 153.7 132.0 16.4% - arhi 107.0 94.5 13.2% - iihi 25.4 17.2 47.7% - nibnz 23.5 17.3 35.8% - WNG 7.5 9.7 (22.7)% - nib Options (3.3) (2.6) (26.9)% - Unallocated (6.4) (4.1) 56.1% Amortisation of acquired intangibles (7.6) (7.8) (2.6)%
Slide 26: Detailed Management Expenses
Detailed Management Expenses (Underwriting segments) Underlying MER Amortisation of marketing and (commissions (commissions commissions management underwriting Employment Occupancy intangibles amortised) underlying (excluding marketing Marketing Marketing Marketing Marketing expenses expenses expens
Slide 27: Premium Payback (PPB)
Premium Payback (PPB) Movement in central estimate of PPB liability ($m) FY17 FY16 • Premium Payback (PPB) relates to previously offered products, where customers are entitled to receive a refund (or partial Opening Balance – central estimate 25.6 38.0 refund) of premiums paid less any claims made,
Slide 28: Other Income & Expenses
Other Income & Expenses1 ($m) FY17 FY16 Change Other income Complementary insurance income 2.5 2.3 8.7% nib Options income 0.0 0.0 NA Agency fee (excluding nib Options) 0.4 0.3 33.3% Rental income 0.2 0.7 (71.4)% Sundry income 0.6 0.9 (33.3)% Digital Health Ventures income 0.1 0.2 (50.0)% Total othe
Slide 29: Investment Asset Allocation
Investment Asset Allocation Consolidated Australian Investment Portfolio New Zealand Investment Portfolio Net return ($m) Net return ($m) Balance ($m) at Allocation Allocation at Allocation 12 months to 12 months to 30/06/2017 at 30/06/2017 30/06/2017 at 30/06/2017 30/06/2017 30/06/2017 Cash1 143.5