Medibank Private Ltd. · ASX:MPL
Medibank Private — FY2020 Earnings Presentation
34 slides from Medibank Private's earnings presentation, Aug 20, 2020
Slide 1: 2020 full year results
Slide 2: Important notice
Important notice medibank The information contained in this presentation is general information only. The information contained in this presentation is not investment or financial product advice and has been prepared without taking into account the investment objectives, financial situation or parti
Slide 3: Highlights
y. j Highlights Craig Drummond - Chief Executive Officer
Slide 4: Results summary
Results summary Sound result in controllable areas. Customer and employee engagement strong medibank Health Insurance: $5.5 billion in benefits payable to customers, up 2.5% Premium revenue of $6.5 billion, up 1.3% Postponement of planned 3.27% premium increase from 1 April 2020 and utilisation of f
Slide 5: COVID-19: our response
medibank COVID-19: our response We continue to support our customers, people and the broader community throughout the ongoing pandemic We stick by our promise to return any permanent savings to customers + Customer support of more than $185 million includes: Premium increase postponed: total custome
Slide 6: FY21 milestone scorecard
FY21 milestone scorecard Objectives . Customer and employee advocacy Continue to achieve a high level of advocacy by delivering exceptional experiences for our customers and employees . Health and wellbeing di Double the uptake of Medibank’s Live Better and Health Assist programs by FY22 while ensur
Slide 7: Strategy and FY21 priorities
Strategy and FY21 priorities Our strategy to grow PHI by leveraging our dual brand strategy and transform into a broader healthcare company is unchanged medibank Deliver differentiated products and services for customers Strategic pillar Leverage our dual brand strategy to grow competitive advantage
Slide 8: Creating a competitive advantage in health insurance
Creating a competitive advantage in health insurance We continue to focus on differentiation, scaling the expanded offer and providing more value to customers Enhancing value Customer loyalty Health & wellbeing Dual brand growth medibank + Introduced additional benefits for COVID-19 related hospital
Slide 9: Transforming into a broader healthcare company
Transforming into a broader healthcare company medibank Good progress on our objective to deliver a broader range of choice and convenient health and wellbeing services at an affordable price bet inseiMtneente programs Alternative care settings Telehealth and other initiatives East Sydney Private Ho
Slide 10: Financial results
Slide 11: Group financial summary
Group financial summary medibank Financial year ended 30 June ($m) 2019 Change Group revenue from external customers! 6,655.8 6,769.6 1.7% Health Insurance operating profit 542.5 470.6 (13.3%) Medibank Health operating profit! 22.1 27.8 25.8% Segment operating profit 564.6 498.4 (11.7%) Corporate ov
Slide 12: COVID-19 impacts
COVID-19 impacts medibank $297m balance sheet liability for deferred COVID-19 claims + Total 28.1k policies suspended 23 March to 30 June 2020 + Customer relief measures including $80m impact in 4Q20 — 18.2k at 30 June - $65m: Temporary waiver of the 1 April 2020 premium increase - $15m: Customers a
Slide 13: Health Insurance result
Health Insurance result Operating performance impacted by increase in claims expense medibank Financial year ended 30 June ($m) 2019 2020. Change COVID Adj.” Premium revenue 6,464.7 6,545.6 1.3% Claims expense (5,404.6) (5,539.5) 2.5% Risk equalisation 42.5 79 (81.4%) Net claims expenses [including
Slide 14: Health Insurance - policyholders
Health Insurance - policyholders Encouraging resident policyholder growth of 0.6% in the last 12 months, despite COVID-19 impacts medibank PHI Product Mix & Downgrading? FY18 FY19 FY20 (0.5%) (1.0%) (1.5%) (1.40%) (2.0%) (2.5%) (2.16%) (2.07%) 1 2 3 4 Financial year ended 30 June 2019 2020 Change Po
Slide 15: Health Insurance - claims
Health Insurance - claims Reported claims growth per policy unit of 2.8% medibank * 3.2% growth in net claims: — 2.5% increase in gross claims - includes $67m of lower than expected ancillary claims due to COVID-19 — Reduction in risk equalisation receipts reflects: — Strong growth in ahm policyhold
Slide 16: Health Insurance - claims
Health Insurance - claims medibank Private hospital claims up 3% - reflecting subdued utilisation growth Net claims expense Indicative composition & movement in dollar value vs. FY19 $ value (including risk equalisation) DOSES = Dental +0% . 10% = Hospital m Extras 6% ® Optical -1% a> = Physiotherap
Slide 17: Health Insurance - management expenses
Health Insurance - management expenses medibank Continued discipline on costs resulted in a 3.0% decrease in management expenses Non cash costs decreased by 6.9%: —~ D&A charges down by $4.3m due to extending useful life of key IT assets [as announced at FY19 results) - Deferred acquisition cost amo
Slide 18: Medibank Health result
Medibank Health result medibank Result reflects period of transition and investment in the business for growth Strong revenue growth of 17.2% including: + Operating margin up 70bps reflecting: - Additional 2 month contribution from HSS of $6.2m - Changing business mix impacting gross margin - $5.8m
Slide 19: Investment portfolio & investment income
Investment portfolio & investment income medibank Investment income down c.$100m reflecting challenging market conditions for both growth and defensive assets + Growth portfolio investment income decline driven by weaker returns + Asset allocation in all asset classes, particularly retail property -
Slide 20: Cash flow
Cash flow medibank Significant increase in cash flow from operations Change in other operating assets Financial year ended 30 June ($m) 2019 and liabilities driven by impact of 0 Change COVID-19 deferred claims Profit before net investment income and income tax 543.7 447.0 (96.7) liability Changes i
Slide 21: Capital
Capital Our capital position remains strong and balance sheet debt free medibank Health insurance capital: — Above top end of 11% to 13% target range? - Increase in capital supports premium revenue growth Other required capital: — Reduced by $39.5m — Reflects impact of Garrison contract exit Unalloc
Slide 22: Dividend
Dividend medibank Full year ordinary dividend of 12.0 cents per share Final ordinary dividend of 6.3 cents per share (fully franked) for the six month period ending 30 June 2020 Full year ordinary dividend represents a payout ratio range of 90% of Underlying NPAT, normalising for investment market r
Slide 23: Conclusion
ighe Conclusion Craig Drummond - Chief Executive Officer OL. Ph a ee
Slide 24: Addressing the industry challenges of affordability & participation
Addressing the industry challenges of affordability & participation —medibank + Affordability of private health insurance remains a challenge for many Australians + Uncertainty over the speed at which the economy recovers will likely keep affordability at the forefront of issues we face as an indust
Slide 25: Medibank's role in a broader health industry likely to be fiscally constrained post COVID-19
Medibank’s role in a broader health industry that is — likely to be fiscally constrained post COVID-19 Long-term industry impacts of COVID-19 Non-urgent public hospital elective surgery wait times — pre COVID-19! (latest data) Australia’s mixed public/private health system is the right model to deli
Slide 26: FY21 outlook
FY21 outlook Policyholder Underlying growth drawing rate We aim to increase market share and achieve total policyholder growth! of >1% assuming a flat market, including an aspiration to grow the Medibank brand during FY21 1. Excluding the impact of policyholder suspensions due to COVID-19 financial
Slide 27: Appendix
Slide 28: Reconciliation of Group operating profit and underlying NPAT
Reconciliation of Group operating profit and underlying NPAT medibank Group operating profit - total operations ($m) FY19 FY20 nge Group operating profit —- continuing operations 528.5 461.0 (12.8%) Operating loss/profit - discontinued operations 30.2 (0.8) (102.6%) Group operating profit - total op
Slide 29: Group financial summary - half by half
Group financial summary -— half by half medibank Change ($m) 1H19 2H19 1H20 2H20 2H20vs2H19 = 2H20vs1H20 1H20vs1H19 Group revenue from external customers! 3,330.8 3,325.0 3,421.5 3,348.1 0.7% (2.1%) 2.7% Health Insurance operating profit 281.5 261.0 224.2 246.4 (5.6%) 9.9% (20.4%) Medibank Health op
Slide 30: Health Insurance policyholders - half by half
Health Insurance policyholders - half by half medibank Change 1H19 2H19 1H20 2H20 2H20vs2H19 2H20vs1H20 1H20 vs 1H19 Premium revenue ($m) 3,240.3 3,224.4 3,315.5 3,230.1 0.2% (2.6%) 2.3% Policyholders' (thousand): Opening balance 1,780.9 1,787.3 1,796.0 1,807.7 1.1% 0.7% 0.8% Acquisitions 94.9 111.3
Slide 31: Balance sheet
Balance sheet medibank ($m) 30 June 2019 30 June 2020 Change Cash and cash equivalents 656.5 871.4 32.7% Financial assets at fair value through profit or loss 2,130.7 1,994.7 (6.4%) Trade and other receivables 283.9 207.1 (27.1%) Deferred acquisition costs 35.2 34.5 (2.0%) Other 24.2 22.9 (5.4%) Cur
Slide 32: Investment portfolio
Investment portfolio medibank As at 30 June 2020 Balance ($m) Po 0 compos Target asset allocati Australian Equities 147 6.3% 5.0% International Equities 152 6.5% 6.0% Property 162 7.0% 7.0% Infrastructure! 6 0.3% 2.0% Growth 467 20.1% 20.0% Fixed income23 1,235 53.0% 52.0% Cash‘ 625 26.9% 28.0% Defe
Slide 33: FY20 milestone scorecard update
FY20 milestone scorecard update Objectives * vu FY20 update Fy19_ FY20 FY20: 21.6% share of market as at 31 Mar 20 Modest gap Medibank 24.8 31.8 ersists P elim S5 Gtk FY20: 542k (FY20 target: 500,000) FY17 FY18 FY19 FY203 <100k c.500k c.1.57m c. 2.6m 1 July 19 - 30 June 20 Medibank —_-1.3% /-17.8k 1
Slide 34: Glossary
Glossary medibank 1H Six months ended/ending 31 December of the relevant financial year 2H Six months ended/ending 30 June of the relevant financial year APRA Australian Prudential Regulation Authority bps Basis points (1.0% = 100 bps] cps Cents per share Ameasure of the likelihood of an existing cu