Medibank Private Ltd. · ASX:MPL
Medibank Private — FY2023 Earnings Presentation
37 slides from Medibank Private's earnings presentation, Aug 24, 2023
Slide 1: Full year results
Full 2023 year results Investor presentation 24 August 2023
Slide 2: Important notice
Important notice General & Summary Information The information contained in this presentation is general information about Medibank Private MPL believes the expectations reflected in these forward‐looking statements are reasonable as Limited (“MPL”) and / or its related bodies corporate (together, “
Slide 3: Acknowledgment of Country
Acknowledgment of Country Medibank acknowledges Aboriginal and Torres Strait Islander peoples as the First Peoples of this nation. We proudly recognise Elders past, present and emerging as the Traditional Owners and Custodians of the lands on which we work and live. We’re committed to supporting sel
Slide 4: Highlights
Highlights David Koczkar Chief Executive Officer
Slide 5: Delivering for customers remains our focus
Delivering for customers remains our focus Supporting affordability Reducing out-of-pockets Prioritising the right cover Value for our customers lowest average resident premium increase in 22 years $25m+ saved Members' Choice Advantage 586k health cover check in $469m $1,600 (average saving) convers
Slide 6: Solid result delivered during challenging business conditions
Solid result delivered during challenging business conditions Net resident Health Insurance Medibank Health segment Health Insurance underlying policyholder growth operating profit profit – continuing basis1 management expense ratio2 +10.9k (+0.6%) $650.4m (+9.8%) $44.2m (+4.2%) 7.5% (+10bps) 1,950k
Slide 7: Momentum has returned
Momentum has returned Strong foundations underpin further growth and greater impact Our strategy Key achievements Key highlights Deliver leading Regaining customer trust in H2 • Customer advocacy above benchmark, improving retention momentum experiences Retained strong employee engagement • Sustaine
Slide 8: Market fundamentals continue to support quality growth
Market fundamentals continue to support quality growth PHI industry settings remain resilient despite economic conditions Market dynamics Consumer attitudes Participation trends Strong employment, premium increases below Consumer sentiment towards PHI resilient New-to-industry growth led by younger
Slide 9: We are providing solutions to challenges in Australian healthcare
We are providing solutions to challenges in Australian healthcare Our investments are enabling more consumer choice to unlock system change Challenges Medibank’s response Live Better Rewards participants Outcomes Shifting focus from • Live Better programs are supporting treatment to people to eat, m
Slide 10: Customers remain at the centre of our strategy
Customers remain at the centre of our strategy Medibank has a platform for growth across health Insurance Health and wellbeing, prevention Combination of leading capabilities for our customers • Preventative health Strong foundations in large and growing health markets Increasing customer choice, va
Slide 11: Our investments in digital underpin our growth in health
Our investments in digital underpin our growth in health How we are bringing this to life for the Medibank customer My Medibank app3 Our digital experience is making it easier for customers • Increased access and ease of navigation when using our services • Providing customers more proactive and per
Slide 12: Financial results
Financial results Mark Rogers Group Lead – Chief Financial Officer & Group Strategy
Slide 13: Group financial summary
Group financial summary Underlying EPS up 14.8% Financial year ended 30 June ($m) 2022 2023 Change Group operating profit up 9.0% • Health Insurance business remains resilient Group revenue from external customers 7,128.5 7,355.3 3.2% • Strong underlying profit growth in Medibank Health Health Insur
Slide 14: Claims recovery post COVID-19
Claims recovery post COVID-19 Claims growth continues to be below expectations – slower recovery in non-surgical Hospital cash claims per policy unit Variance to expected underlying hospital & extras cash claims ($m/month) 6 months to May claims per policy unit vs pre-COVID-19 period1,2 $138m or 5%
Slide 15: Health Insurance result
Health Insurance result Underlying operating margin up 40bps to 8.6% COVID-19 COVID-19 Modest COVID impact of $0.3m (FY22: $0.6m) Financial year ended 30 June ($m) 2022 2023 Change impact1 Adj. • $451.7m returned to customers through give back initiatives Premium revenue 6,859.8 7,148.7 4.2% 451.7 7
Slide 16: Health Insurance – resident policyholders
Health Insurance – resident policyholders Returned to policyholder growth in Q4 Industry growth remained buoyant at 1.9% for 12 months to June 23 (FY22: 2.7%)3 Financial year ended 30 June 2022 2023 Change Adult Dependant Reform (ADR) increasing the number of 25 – 30 year olds remaining Policyholder
Slide 17: Health Insurance – underlying resident claims
Health Insurance – underlying resident claims Underlying claims growth of 2.4% per policy unit - includes impact of ADR Financial year ended 30 June ($m)1 2022 2023 Change Underlying resident gross claims up 4.3% • Risk equalisation had no impact on net claims growth with the Claims expense (5,954.4
Slide 18: Health Insurance – underlying portfolio performance
Health Insurance – underlying portfolio performance Continued growth in both resident and non-resident PHI businesses Resident Non-resident Total Financial year ended 30 June ($m)1 2022 2023 Change 2022 2023 Change 2022 2023 Change Premium revenue 7,082.3 7,402.9 4.5% 146.9 197.5 34.4% 7,229.2 7,600
Slide 19: Health Insurance – management expenses
Health Insurance – management expenses Benefits of scale and productivity continue to mitigate inflation Underlying MER improvement Financial year ended 30 June ($m) 2022 2023 Change Premium revenue 6,859.8 7,148.7 4.2% -130bps Management expenses (536.1) (572.4) 6.8% - Depreciation and amortisation
Slide 20: Medibank Health result
Medibank Health result Operating profit from continuing businesses up 17.2% – positioned for further growth Continuing business1 Beyond Blue/1800RESPECT3 Total Financial year ended 30 June ($m) 2022 2023 Change 2022 2023 Change 2022 2023 Change Revenue 279.9 277.1 (1.0%) 41.9 - n.m. 321.8 277.1 (13.
Slide 21: Investment portfolio and investment income
Investment portfolio and investment income Stronger equity markets, higher RBA cash rate and narrowing credit spreads Reported performance2 Underlying performance2 Financial year ended 30 Jun ($m) 2022 2023 Change 2022 2023 Change Net investment income: Growth portfolio income 2.9 43.2 n.m. 35.3 36.
Slide 22: Capital and dividend
Capital and dividend Strong capital position – sufficient headroom for temporary $250m supervisory adjustment Proforma capital position includes a $167.0m benefit from new APRA capital Proforma1 Financial year ended 30 June ($m) and AASB17 standards (refer to slide 28) 2022 2023 • Eligible capital b
Slide 23: Financial priorities for FY24
Financial priorities for FY24 Well positioned to navigate the changing economic environment Maintain Health Insurance Mitigate inflationary Deliver on Medibank Maintain our sources of revenue growth claims pressure Health’s growth potential difference • Focus on increasing resident • Maintain focus
Slide 24: Conclusion
Conclusion
Slide 25: We enter FY24 with good momentum
We enter FY24 with good momentum Medibank remains well positioned to grow in health We will always put We have good momentum We remain focused on growing our customers first leading into FY24 as a health company • Strengthen customer trust and execute • Fundamentals of the PHI business have • Insura
Slide 26: FY24 outlook
FY24 outlook We continue to assess claims activity. Any permanent net claims savings due to COVID-19 Customer relief will be given back to customers through additional support in the future. Resident We anticipate further moderation in resident industry growth in FY24 relative to FY23. policyholder
Slide 27: Appendix
Appendix
Slide 28: No impact on underlying business or dividend approach under new standards
No impact on underlying business or dividend approach under new standards Outcomes under AASB171 Equity Reserve Net Asset and Eligible Capital Reconciliation • Medibank will report under AASB17 from 1 July 2023 • Total Equity Reserve of $205.6m2 created on AASB17 transition • Proforma capital positi
Slide 29: Reconciliation of reported to underlying claims and COVID-19 impacts
Reconciliation of reported to underlying claims and COVID-19 impacts COVID-19 impacts – Health Insurance Reconciliation of reported to underlying claims Resident Total Financial year ended 30 June ($m) 2022 2023 Financial year ended 30 June ($m) 2022 2023 2022 2023 Cash give backs announced 194.6 33
Slide 30: Milestones scorecard and update
Milestones scorecard and update Deliver leading experiences Differentiate our insurance business Expand in health Customer advocacy: Service NPS (average) Resident policyholder market share Medibank Health FY23 FY24 FY23 FY26 aspiration FY23 FY24 - FY26 target Updated FY23 benchmark1 benchmark1 Orga
Slide 31: Our strategy – growing as a health company
Our strategy – growing as a health company Deliver leading experiences Differentiate our Expand in health insurance business Create personalised and Deliver more value, choice Focus growth on prevention connected customer experiences and control for customers and integrated care models Empower our p
Slide 32: Summary of ESG achievements and progress
Summary of ESG achievements and progress Our sustainability strategy is anchored by our vision of Better Health for Better Lives FY23 key achievements Future focus • 34% growth in Live Better Rewards participants and 64% growth in • 800k Live Better Rewards participants and more than 50k preventativ
Slide 33: Our health investments
Our health investments Target Ownership Investments Description Benefits to Medibank markets interest (%) Myhealth Medical Holdings Pty Ltd 49% • Medibank acquired a non-controlling interest in Myhealth Support preventative health and GP-led Medical Group for c. $63m in 2021 proactive care managemen
Slide 34: Group financial summary – half by half
Group financial summary – half by half Change ($m) 1H22 2H22 1H23 2H23 2H23 v 2H22 2H23 v 1H23 1H23 v 1H22 Group revenue from external customers 3,581.2 3,547.3 3,629.4 3,725.9 5.0% 2.7% 1.3% Health Insurance operating profit 280.9 311.7 305.2 345.2 10.7% 13.1% 8.7% Medibank Health segment profit 25
Slide 35: Health Insurance resident policyholders – half by half
Health Insurance resident policyholders – half by half Change 1H22 2H22 1H23 2H23 2H23 v 2H22 2H23 v 1H23 1H23 v 1H22 1 Policyholders (thousand): Opening balance 1,889.1 1,917.2 1,950.0 1,951.7 1.8% 0.1% 3.2% Acquisitions 106.2 116.8 97.7 107.5 (8.0%) 10.0% (8.0%) Lapses (78.1) (84.0) (96.0) (98.3)
Slide 36: Investment portfolio
Investment portfolio Average balance Average balance Portfolio Target asset Average balance As at 30 June 2023 Spot balance ($m) ($m) portfolio composition allocation ($m) FY22 FY23 composition Australian equities 153.2 5.7% 146.6 5.9% 6.0% 130.2 International equities 121.3 4.5% 108.3 4.4% 5.0% 118
Slide 37: Glossary
Glossary Term Definition Term Definition 1H Six months ended/ending 31 December of the relevant financial year Medibank at Home A range of programs and trials that gives eligible members the choice of whether they receive 2H Six months ended/ending 30 June of the relevant financial year care in a ho