Medibank Private Ltd. · ASX:MPL
Medibank Private — FY2019 Earnings Presentation
33 slides from Medibank Private's earnings presentation, Aug 22, 2019
Slide 1: 2019 full year results
medibank 2019 full year results | Investor Presentation Craig Drummond - Chief Executive Officer | Mark Rogers - Chief Financial Officer 22 August 2019
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
Slide 4: Results summary
Results summary medibank Solid performance delivering better outcomes for customers alongside sound returns for shareholders Group operating profit Group NPAT Final ordinary Special dividend Continuing $528.5m +1.9% [M Continuing $437.7m +3.2% dividend Total! $558.7m +1.8% Total! $458.7m +3.1% 7.40c
Slide 5: Milestone scorecard update
Milestone scorecard update 0 Good progress across all milestones. Revised milestones reflect raising the bar on PHI growth, Medibank Health and productivity Objectives FY19 update —FY18 FY19_—s F119: 22.4% share at March 2019 Continued Medibank 1 24.8 improvement ahm 38.5 FY19: circa 519,200 (500,00
Slide 6: Strategy and FY20 priorities
Strategy and FY20 priorities medibank Medibank’s strategy remains unchanged - focus on growing PHI and transforming into a broader healthcare company Better Health for Better Lives Strategic Deliver differentiated Continue to improve Expand the offering ill products and services healthcare value for
Slide 7: Medibank - from funder to healthcare company
Medibank - from funder to healthcare company medibank Medibank is in a strong position to differentiate and deliver greater value and choice for customers Personalising customer experience with targeted engagement, rewards and health services Technology has enabled more personalised customer engagem
Slide 8: Medibank Health - alternative ways of delivering healthcare
Medibank Health - alternative ways of delivering healthcare medibank Work with public and private payors to create greater choice for customers to have care at home Medibank in-home care capability: + Medibank at Home has provided or facilitated care in the home to over 2,000 customers in FY19 + Wit
Slide 9: Medibank Health - alternative ways of delivering healthcare
Medibank Health - alternative ways of delivering healthcare medibank Customers to have choice and zero out-of-pocket costs in hip and knee early to home trial with Nexus Hospitals In partnership with Nexus and doctors, Medibank is funding a new way of delivering doctor led and designed care to provi
Slide 10: Medibank
medibank
Slide 11: Group financial summary
Group financial summary medibank Financial year ended 30 June ($m) 2019 2018 Change Group revenue from external customers! 6,655.8 6,468.8 2.9% Health Insurance operating profit 542.5 535.6 1.3% Medibank Health operating profit 22.1 17.4 27.0% Segment operating profit 564.6 553.0 2.1% Corporate over
Slide 12: Health Insurance result
Health Insurance result medibank Operating profit up 1.3% to $542.5 million Financial year ended 30 June ($m) 2019 2018 Change Premium revenue 6,464.7 6,319.5 2.3% Claims expense (5,404.6) (5,281.1) 2.3% Risk equalisation 42.5 54.4 (21.9%) Net claims expenses [including risk equalisation) (5,362.1)
Slide 13: Health Insurance - policyholders
Health Insurance - policyholders medibank Encouraging net resident policyholder growth of 0.8% over the last 12 months Financial year ended 30 June 2019 2018 Change Policyholders' (thousand): Opening balance 1,780.9 1,776.1 0.3% Acquisitions 206.2 204.8 0.7% Lapses (191.1) (200.0) (4.5%) Closing bal
Slide 14: Health Insurance - claims
Health Insurance - claims Average net claims expense per policy unit up 2.3%, or 2.0% adjusted for provision releases medibank * Hospital claims up 3.1% reflecting: * Extras claims growth reduced to 1.0%: — Utilisation of 0.9% in line with FY18 — Elevated claims growth in FY18 due to: — Savings from
Slide 15: Health Insurance - claims
Health Insurance - claims Private hospital outlays up 3% — reflecting subdued utilisation growth medibank Net claims expense (including risk equalisation) Hospital m™ Extras $5,226.7m $5,362.1m —_—_ 5 41.0% $1,312.4m _—_> 43.1% $3,914.3m $4,036.6m FY18 FY19 Extras Hospital Indicative composition and
Slide 16: Health Insurance - management expenses
Health Insurance - management expenses medibank Continued discipline on costs results in decrease in management expense to 8.7% Non cash costs D&A up 13.9% — Up $6.1m on FY18 largely reflecting full year impact of ERP commissioning - Extending SAP useful life from 7 to 10 years: FY20 D&A expected to
Slide 17: Medibank Health
Medibank Health medibank Continuing businesses result reflects contribution from Home Support Services 10 months revenue and operating profit contribution from + Operating margin down slightly Home Support Services (HSS) of $30.3m and $4.8m, - Gross margin down 350 basis points offset by 330 basis r
Slide 18: Investment portfolio & investment income
Investment portfolio & investment income medibank Higher investment income driven by credit and interest rate market returns Growth portfolio investment income impacted by weaker property sector + Each 25bps cash rate cut is estimated to reduce returns; process commenced to diversify existing proper
Slide 19: Cash flow
Cash flow medibank Our capital position remains strong and balance sheet debt free Change in other operating assets Financial year ended 30 June ($m) 2019 2018 Change and liabilities reflects the FY18 $20m one-off loyalty bonus Profit before net investment income and income tax 543.7 532.7 11.0 Chan
Slide 20: Update on capital settings
Update on capital settings medibank Capital range Sources of capital + Well progressed in aligning health insurance capital framework + Eligible capital base currently comprises 100% with LAGIC shareholders funds + Reduced target capital range to 11% - 13% of premium revenue + Intention is to divers
Slide 21: Capital
Capital medibank Our capital position remains strong and balance sheet debt free Pro forma capital position reflects: 30 Jun . ($m) 2019 30 Jun 30 Jun ~ New arget aia range of 19% a Beton Zt oo, Total equity 1,935.4 1,935.4 1,829.2 ~ Special dividend of 2.50 cents per share Less: Intangible and illi
Slide 22: Dividend
Dividend medibank Full year ordinary dividend increased by 0.40 cents to 13.10 cents per share and special dividend of 2.50 cents per share Final ordinary dividend of 7.40 cents per share for the six month period ending 30 June 2019, bringing the full year FY19 dividend to 13.10 cents per share (ful
Slide 23: Navigating a lower premium environment
Navigating a lower premium environment medibank Broad response across four levers 2. Customer Growth + Hospital contracting: + Policyholder growth: ~ Re-contract in-line with premium rate rise environment ~ Grow Medibank brand volumes during FY21 ~ Leverage capability - Continuation of dual brand re
Slide 24: Medibank
medibank
Slide 25: Driving change & ensuring a sustainable future
Driving change & ensuring a sustainable future medibank Protecting the future of our dual public private health system Driving change in the Meeting the affordability health system challenge + Medibank at Home + Reducing our own costs + Health Concierge & + Introducing youth discounts CareComplete f
Slide 26: Outlook
Outlook medibank * Expect flat overall PHI market volumes * On the current policyholder trajectory we expect to see Medibank brand volumes stabilise by the end of FY20 and grow during FY21 * Hospital and extras utilisation growth to remain around current levels for FY20, with prostheses expenditure
Slide 27: Medibank
medibank
Slide 28: Reconciliation of Group operating profit and Underlying NPAT
Reconciliation of Group operating profit and Underlying NPAT medibank Group operating profit - total operations ($m) FY19 FY18 Change Group operating profit —- continuing operations 528.5 518.9 1.9% Operating profit - discontinued operations! 30.2 29.9 1.0% Group operating profit — total operations
Slide 29: Balance sheet
Balance sheet medibank ($m) 30 June 2019 30 June 2018 ange Cash and cash equivalents 656.5 470.1 39.7% Financial assets at fair value through profit or loss 2,130.7 2,276.5 (6.4%) Trade and other receivables 283.9 292.2 (2.8%) Deferred acquisition costs 35.2 36.2 (2.8%) Other 24.2 16.0 51.3% Current
Slide 30: Group financial summary - half by half
Group financial summary - half by half medibank nge 2H19 vs 2H19 vs 1H19 vs 2H18 1H19 1H18 2H19 1H19 2H18 1H18 Group revenue from external customers! 3,325.0 3,330.8 3,221.0 3,247.8 3.2% (0.2%) 2.6% Health Insurance operating profit 261.0 281.5 258.3 277.3 1.0% (7.3%) 1.5% Medibank Health operating
Slide 31: Health Insurance policyholders - half by half
Health Insurance policyholders - half by half medibank Change 2H19 1H19 2H18 1H18 2H19vs 2H18 2H19 vs 1H19 1H19 vs 1H18 Premium revenue ($m) 3,224.4 3,240.3 3,144.4 3,175.1 2.5% (0.5%) 2.1% Policyholders' (thousand): Opening balance 1,787.3 1,780.9 1,771.9 1,776.1 0.9% 0.4% 0.3% Acquisitions 111.3 9
Slide 32: Investment portfolio
Investment portfolio medibank As at 30 June 2019 Portfolio composition Target asset allocation Australian Equities 5.1% 5.0% International Equities 6.5% 6.0% Property 6.0% 7.0% Infrastructure 2.1% 2.0% Growth 19.7% 20.0% Fixed income! 51.3% 52.0% Cash2 29.0% 28.0% Defensive 80.3% 80.0% Total Fund 10
Slide 33: Glossary
Glossary medibank Six months ended/ending 31 December of the relevant 1H financial year on Six months ended/ending 30 June of the relevant financial year APRA Australian Prudential Regulation Authority Brand NPS A measure of the likelihood of an existing customer to recommend the brand bps Basis poi