NIB Holdings Ltd · ASX:NHF
NIB — FY2009 Earnings Presentation
39 slides from NIB's earnings presentation, Aug 17, 2009
Slide 1: 2009 Full Year Results
2009 I z WW = Lu QO z =) O rs < ef
Slide 2: Today's Agenda
paz) i ll b holdings TODAY’S AGENDA
Slide 3: Headlines
Headlines For personal use only Net policyholder growth of 18,899 (5.2%) in difficult economic conditions Premium revenue of $829.5 million up 9.4% on previous year Pre-tax underwriting profit of $40.2 million up 21.8% on previous year (FY09 net underwriting margin 4.8%) Consolidated profit
Slide 4: Financial snapshot
Financial snapshot For personal use only Change ($m) FY08* FY09 $m % Premium revenue 758.2 829.5 71.3 9.4 111.2 122.0 Gross margin 10.8 9.7 14.7% 14.7% (78.2) (81.8) Management Expense (3.6) 4.6 10.3% 9.9% 33.0 40.2 Net margin 7.2 21.8 4.4% 4.8% 7.5 (1.8) Net investment return (9.3) (124.0) 1.6% ((0
Slide 5: Growth
Growth Despite GFC and changes to Government policy, our organic growth For personal use only strategy continues to deliver strong results (%) FY05 FY06 FY07 FY08 FY09 Net policyholder growth (nib) 4.2 3.9 8.8 11.1 5.2 N t policyholder Net li h ld growth th rate t (industry) (i d t ) 08 0.8 21 2.1 4
Slide 6: Gross Margin
Gross Margin Gross margin remains stable with risk equalisation a growing impost For personal use only FY09 vs FY08 Normalised earnings (m) FY05 FY06 FY07 FY08 FY09 $m % Premium revenue 530.7 611.9 666.0 758.2 829.5 71.3 9.4 Claims expense (406.5) (441.2) (505.4) (554.0) (599.3) (45.3) 8.2 HBRTF/RET
Slide 7: Operating Expenses (underwriting)
Operating Expenses (underwriting) Decrease in MER, with operating expenses stable despite one off For personal use only costs of $4.2m FY09 vs FY08 ($m) FY05 FY06 FY07 FY08* FY09 $m % fav/(unfav) Employment 29.5 31.9 37.1 36.2 35.7 0.5 1.4 Marketing 5.8 7.4 13.8 18.9 17.2 1.7 9.0 IT 4.3 4.4 5.1 5.6
Slide 8: Net Margin
Net Margin Net underwriting result of $40.2m, up $7.2m or 21.8 % on FY08 For personal use only FY09 vs FY08 FY05 FY06 FY07 FY08* FY09 % Pre-tax underwriting result ($m) 15.4 51.4 23.7 33.0 40.2 7.2 21.8 Net underwriting margin (%) 2.9 8.4 3.6 4.4 4.8 0.4 9.1 * FY08 result was normalised to remove th
Slide 9: Investments
Investments O Overall ll FY09 iinvestment t t result lt very disappointing di i ti For personal use only FY09 vs FY08 FY05 FY06 FY07 FY08 FY09 % Net investment return ($m) 17.0 17.9 31.3 7.5 (1.8) (9.3) (124.0) Net percentage return (%) 8.2 6.5 8.8 1.6 (0.4) (2.0) Investment Return Investment Split
Slide 10: Holding company and other subsidiary expenses
Holding company and other subsidiary expenses Initiatives underway to reduce extent of holding company costs For personal use only FY09 vs FY08 ($m) FY08* FY08 FY09 $ $m % Share registry costs – ongoing 1.1 2.2 1.1 100.0 Share registry costs – one off 0.0 1.3 1.3 - Due Diligence 1.4 1.3 (0.1) (7.1)
Slide 11: Profitability and performance metrics
Profitability and performance metrics Consolidated result hurt by investment losses For personal use only FY05 FY06 FY07 FY08* FY09 Profit before tax ($m) 26.8 69.5 52.9 37.6 31.6 NPAT ($m) 37.2 26.7 23.8 EPS ((cps) p ) 5.2 4.7 ROE (%) 7.0 6.6 TSR (%)1 (38.0) 58.2 * FY08 result was normalised to rem
Slide 12: Summary of movement FY08 to FY09
Summary of movement FY08 to FY09 100 For personal use only 41.5 45.5 Net policyholder 90 growth $18.7m 80 45.6 26.9 Net product 70 mix $9.3m 60 27.1 13 1.3 13.9 ($m) 50 17.8 2.0 1.7 0.5 5.8 40 37.5 9.3 30 26 7 26.7 40 4.0 3.1 23.8 20 10 0 12
Slide 13: Capital Management
Capital Management Movement in surplus capital For personal use only ($m) S Surplus l capital it l att 30 June J 2008: 2008 105 6 105.6 Board’s revision to capital adequacy of 1.4x (31 Dec 2008) (1.5x 30 June 2008) - 28.5 On market share buy buy-back back (17 8) (17.8) 2009 Full Year dividend – norm
Slide 14: Balance Sheet
Balance Sheet Remains R i strong, t with ith reduction d ti in i nett assets t due d to t dividend di id d and d For personal use only share buy-back activities ($m) At June 07 June 08 June 09 Health fund operating assets Current assets 26.6 32.1 30.5 Non-current assets 40.0 71.6 62.0 Health fund op
Slide 15: Cash flow
Cash flow For personal use only Fy09 vs FY08 ($m) FY05 FY06 FY07 FY08 FY09 $m % Net cash inflow/(outflow) 32 3 32.3 79 7 79.7 67 9 67.9 53 2 53.2 44 2 44.2 (9 0) (9.0) (16 9) (16.9) from operations Net cash inflow/(outflow) (30.3) (78.8) (60.7) 66.0 (11.0) (77.0) (116.7) from investing Net cash infl
Slide 16: Market outlook
Market outlook Industry and market fundamentals are sound For personal use only Annual Growth - GDP vs Industry 6 0% 6.0% GDP Annual growth 5.0% Industry Annual Growth 4.0% wth % grow 3.0% 2.0% 1.0% 0.0% Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 System growth of GDP +1-3% Gr
Slide 17: Health fund members prefer demutualisation
Health fund members prefer demutualisation Can there now be any serious doubt? For personal use only Manchester nib MBF AHM U it Unity Members who voted 31% 40% 58% 78% Votes in support of scheme 95% 98% 95% 99% Source: Company announcements “nib pursued a demutualisation and listing on ASX in 2007
Slide 18: Business strategy
Business strategy Profitable growth and strong returns on invested capital For personal use only Target <40’s market 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
Slide 19: Business improvement
Business improvement For personal use only Customer experience • Online engagement • CRM development • National Australia Bank channel Efficiency • Reconfiguration g of retail network • Outsourcing and automation document processing • Electronic claims processing Product development • Young Y
Slide 20: Key enterprise risks
Key enterprise risks For personal use only Market • Macro-economic environment • Competitor activity • Claims inflation Sovereign • Premium pricing • 30% Private Health Insurance Rebate • Medicare Levy Surcharge • National Health and Hospital Reform Commission Investment • Market volatility •
Slide 21: Capital management
Capital management nib’s new prudential target (capital adequacy) is 1.4x For personal use only As at 30 June 2009, nib had $131.6 million in capital surplus to its target (post final dividend)) Continuing to seek a balance between being able to readily finance value creating investment and no
Slide 22: Summing up
Summing up For personal use only FY09 a sound result with above system growth and improved underlying profitability FY10 shaping up as another positive year with forecast: • Net policyholder growth between 4-6% • Net underwriting result of $45-$50 million (net underwriting margin of 5-5.5%) ni
Slide 23: For personal use only
For personal use only
Slide 24: For personal use only
For personal use only
Slide 25: Policyholder growth
Policyholder growth Sales and lapse For personal use only FY07 FY08 FY09 nib at 30 Jun 07 at 30 Jun 08 at 30 Jun 09 Total policyholders 328,784 365,389 384,288 - Policyholder growth rate 8.8% 11.1% 5.2% Total sales 49,758 67,456 50,438 - Sales rate 16.5% 20.5% 13.8% T t l lapses Total l 23 272 23,27
Slide 26: Reduction in claims backlog
For personal use only Number of b backlog docume ents 0 2,000 4,000 6,000 8 000 8,000 10,000 12,000 Jun-0 07 14,000 Jul-0 07 Aug-0 07 Sep-0 07 Oct-0 07 Nov-0 07 Dec-0 07 Jan-0 08 Feb-0 08 Mar-0 08 Backlog Documents Apr-0 08 May-0 08 Jun-0 08 Jul-0 08 Reduction in claims backlog Aug-0 08 Sep-0 08 Oct
Slide 27: Claims expense and levies
Claims expense and levies For personal use only FY09 v ($m) FY05 FY06 FY07 FY08 FY09 FY08 (%) Claims expense 406.5 441.2 505.4 554.0 599.3 8.2 HBRTF/Risk equalisation levy 37 2 37.2 42 8 42.8 48 1 48.1 73 1 73.1 87 0 87.0 19 0 19.0 - Gross deficit (88.4) (93.5) (109.8) (117.5) (137.1) 16.7 - Calcula
Slide 28: 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% Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Source: PHIAC
Slide 29: 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% Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Note: industry data from 1 April 2007 is
Slide 30: 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 1.61 1.50 1.5 1.44 Internal target (1 (1.4) 4) 1.0 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 30
Slide 31: Regulatory capital requirements
Regulatory capital requirements $131.6m of surplus capital above internal target after allowing For personal use only for FY09 dividend Health Fund (HF) capital (at 30 June 09) Group capital allocation (at 30 June 09) $78.8m $21.8m $13.9m $174.9m $120.9m $10.7m $369.0 m $10.7m $101.4m Cap ad reserve
Slide 32: Data sheet – nib
Data sheet – nib Jun 03 FY03 / at 30 Jun 04 FY04 / at 30 Jun 05 FY05 / at 30 Jun 06 FY06 / at 30 Jun 07 FY07 / at 30 Jun 08 FY08 / at 30 Jun 09 FY09 / at 30 For personal use only 0 0 0 0 0 0 0 nib Total policyholders 255,812 279,272 290,940 302,299 328,784 365,389 384,288 - Policyholder growth 9.2%
Slide 33: Data sheet – PHI industry
Data sheet – PHI industry For personal use only FY03 / at 30 FY04 / at 30 FY05 / at 30 FY06 / at 30 FY07 / at 30 FY08 / at 30 FY09 / at 30 1 June 03 June 04 June 05 June 06 June 07 June 08 June 09 PHI industry y Total Policyholders 4,649,268 4,671,430 4,708,420 4,806,754 5,008,329 5,219,567 5,378,34
Slide 34: Data sheet – nib normalised financials
Data sheet – nib normalised financials For personal use only ($m) FY05 FY06 FY07 FY08 FY09 PROFIT & LOSS ` Premium revenue 530.7 611.9 666.0 758.2 829.5 Gross underwriting result 71.7 111.8 94.9 111.2 122.0 Net underwriting result 15.4 51.4 23.7 33.0 40.2 ((1)) I Investment t t income i 11 4 11.4 18
Slide 35: Normalised profit & loss reconciliation
Normalised profit & loss reconciliation For personal use only % FY09 FY08 change ($m) Statutory Adjust Pro Statutory Adjust Pro forma forma Premium revenue 829.5 - 829.5 758.2 - 758.2 9.4 Net claims incurred (707.5) - (707.5) (647.0) - (647.0) 9.4 Gross underwriting result 122.0 - 122.0 111.2 - 111.
Slide 36: Financial results – underlying results
Financial results – underlying results Net underwriting result of $40.2m, up $7.2m or 21.8% on FY08 For personal use only Underlying results split out investment income between: • Normalised investment income for FY09 – calculated on the basis of a 5 5.5% 5% (FY08: 7.0%) assumed return over averag
Slide 37: Overseas and unverified policyholders trust
Overseas and unverified policyholders trust For personal use only 120,000,000 100,000,000 Number off shares 80,000,000 60,000,000 40,000,000 20 000 000 20,000,000 0 Oct-07 Oct-08 an-08 eb-08 25-Mar-08 Apr-08 un-08 25-JJul-08 an-09 eb-09 25-Mar-09 Apr-09 un-09 ov-07 ec-07 ay-08 ug-08 ep-08 ov-08 ec-0
Slide 38: Disclaimer
Disclaimer For personal use only The material in this presentation is a summary of the results of nib holdings limited (nib) for the 12 months ended 30 June 2009 and an update on nib’s activities and is current at the date of preparation, 17 August 2009. Further details are provided in the Company’s
Slide 39: For personal use only
2009 I z WW = Lu QO z =) O rs < ef