NIB Holdings Ltd · ASX:NHF
NIB — H1 FY2008 Earnings Presentation
36 slides from NIB's earnings presentation, Feb 27, 2008
Slide 1: Results for the six months ended 31 December 2007
For personal use only nib holdings limited Results for the six months ended 31 December 2007 Mark Fitzgibbon, MD & CEO Michelle McPherson, Deputy CEO & CFO 27 February 2008
Slide 2: Today's agenda
Today’s agenda For personal use only Overview Mark Fitzgibbon Financial performance Michelle McPherson Strategy and outlook Mark Fitzgibbon Q&A 2
Slide 3: Overview
For personal use only Overview Mark Fitzgibbon Managing Director & Chief Executive Officer
Slide 4: Business highlights
Business highlights Strong policyholder growth due to continued success of organic growth For personal use only strategy • nib growing faster than industry, up 6.5% vs 2.1% for industry • 21,464 net new policyholders – 67% of FY08 Prospectus forecast Normalised net underwriting margin of 3.7% –
Slide 5: Growth highlights
Growth highlights nib is capturing a large component of market growth For personal use only Growing faster than top 5 funds over 1H08, with second largest growth in number of total policyholders Source: PHIAC 5
Slide 6: Results highlights
Results highlights Net margin compares favourably to FY08 Prospectus forecast For personal use only FY08 % of FY08 Prospectus Prospectus Normalised 1H08 forecast forecast Premium revenue $370.9m $750.7m 49.4% Gross underwriting result1 $51.8m $102.0m 50.8% Management expenses $(37.9)m $(83.3)m 45.5%
Slide 7: Financial performance
For personal use only Financial performance Michelle McPherson Deputy CEO & Chief Financial Officer
Slide 8: Financial results
Financial results Strong net margin compares favourably to FY08 Prospectus forecast 1H08 1H07 % change For personal use only ($m) Statutory Adjust Normalised Statutory Adjust Normalised 1H08 vs 1H07 Profit after tax (7.6) 25.3 17.7 36.8 (12.9) 23.9 (25.9)% Significant one-off costs in 1H08 re demu
Slide 9: Financial results – normalised – key drivers
For personal use only ($m) 10 20 30 40 50 60 70 0 1H07 NPAT 23.9 Premium revenue - 32.0 policyholder growth Premium revenue - product mix (7.6) Premium revenue - 18.2 rate increase Claims expense - policyholder growth (20.6) Claims expense - 14.5 product mix Claims expense - inflation (19.0) Claims
Slide 10: Premium revenue
Premium revenue Strong growth in premium revenue – up 13% to $370.9m For personal use only Premium revenues continue to grow strongly $42.6m increase in premium revenue: • policyholder growth – $32.0m • 2007 premium rate increase – $18.2m • net product mix changes – $(7.6)m Recent price increase
Slide 11: Claims expense and levies
Claims expense and levies Claims expenses Stable claims inflation Normalised ($m) 1H05 1H06 1H07 1H08 For personal use only Hospital claims inflation stabilised Claims expense 202.8 221.6 249.6 274.7 Risk Eq Levy 19.1 19.6 19.9 34.8 State Levies 7.6 7.8 8.6 9.6 Total 229.5 249.0 278.1 319.1 Note: 1H
Slide 12: Management expenses
Management expenses Significant investment in growth For personal use only Management expenses Increase in management expenses largely reflects Employment Marketing IT Occupancy Other spend on organic growth strategy of $8.1m 40 37.9 (1H07 - $3.4m) 28.1 28.9 31.2 2H08 MER will be higher than 1H0
Slide 13: Investment income
Investment income 1H08 investment income affected by market volatility For personal use only Investment income inherently volatile Investment return Annualised return 1H08 1H07 Cash 6.2% 6.0% Australian shares 9.7% 21.8% Australian fixed interest 3.2% 4.6% O/s shares (4.2)% 23.2% O/s fixed interest
Slide 14: Investment assets
Investment assets Target split – 65% defensive / 35% growth For personal use only Investment assets – $459.6m (at 31 Dec 07) Portfolio is externally managed to a target split of 65% defensive / 35% growth assets • mix at 31 Dec 07 was 69.7%/30.3% (67.9%/32.1% excluding $25m held pending registrati
Slide 15: Regulatory capital requirements
Regulatory capital requirements Approx. $110m capital above target requirements For personal use only Capital allocation (at 31 Dec 07) nib health fund total assets at 31 Dec 07 of $514.3m (30 June 2007 - $508.5m) Capital position of the health fund remains very strong with capital adequacy at 2
Slide 16: Capital management and dividends
Capital management and dividends Strong balance sheet with no gearing and excess capital For personal use only Capital management In the absence of any strategic initiatives, the Board intends reviewing the capital position and gearing around the release of the FY08 results Dividends At the time
Slide 17: Strategy and outlook
For personal use only Strategy and outlook Mark Fitzgibbon Managing Director & Chief Executive Officer
Slide 18: Business strategy – key tenets
Business strategy – key tenets For personal use only Considerable latent demand for PHI remains in the national marketplace, in particular the “under 40” segment nib is becoming a dominant force within “under 40” segment through: • product design • pricing • distribution • brand alignment • incr
Slide 19: Market outlook
Market outlook Demand for PHI is gaining momentum For personal use only Total industry policyholder growth Penetration1 by State is increasing rate is increasing Penetration Growth Dec 06 Dec 07 1H08 NSW / ACT 44.7% 45.7% 2.2% Victoria 42.0% 43.1% 2.5% Queensland 40.3% 41.7% 3.3% WA 47.4% 49.3% 3.0%
Slide 20: Business outlook
Business outlook nib is capturing a large component of market growth For personal use only nib policyholder numbers consistently Second largest growth in number of total growing faster than top 5 funds policyholders over 1H08... Success of organic growth strategy can be seen ...as well as in “20-3
Slide 21: Business outlook (cont'd)
Business outlook (cont’d) Factors underpinning nib’s strong growth For personal use only Focus on target segment and “winning” culture Attractive products and value proposition • simplicity • ancillary bias • deductibles Price competitiveness • Basic Saver $9.95 • premium per Single Equivalent
Slide 22: Organic growth strategy – progress
Organic growth strategy – progress We are exceeding all of our key tactical measures For personal use only FY08 Prospectus FY05 FY06 FY07 1H07 2H07 1H08 Forecast Annualised growth in net 4.2% 3.9% 8.8% 6.6% 10.5% 13.0% 9.7% membership % of new sales new to 68.7% 70.8% 74.4% 75.9% 74.4% 80.4% n/a cat
Slide 23: Earnings growth – key levers
Earnings growth – key levers We have a clear view of what will drive earnings For personal use only Organic growth (sales and retention) and product “buy-up” Achieving target gross and net margins Managing ongoing claims inflation through: • attracting younger / better risks • defending agains
Slide 24: Looking forward
Looking forward Market fundamentals are sound For personal use only The PHI market will continue to grow (CY07 growth was 4.7%) given: • sound economic conditions • ongoing Government support • low confidence in public system • greater competition BUPA / MBF merger will create a second insurer w
Slide 25: Looking forward (cont'd)
Looking forward (cont’d) For personal use only E-commerce, process automation and competition will continue to push down industry running expenses • our management expense ratio (ex marketing) will continue to trend down • significant longer term opportunities for M&A to provide cost synergies • s
Slide 26: Summary and outlook
Summary and outlook We are pleased with our 1H08 results and normalised NPAT of $17.7m For personal use only We anticipate total net FY08 policyholder organic growth in excess of 35,000 – well in excess of FY08 Prospectus forecast of around 32,000 We anticipate our normalised net underwriting
Slide 27: Q&A
For personal use only Q&A
Slide 28: Appendix
For personal use only Appendix
Slide 29: Data sheet – nib
Data sheet – nib FY03 / at FY04 / at FY05 / at FY06 / at 1H07 / at FY07 / at 1H08 / at 30 Jun 03 30 Jun 04 30 Jun 05 30 Jun 06 31 Dec 06 30 Jun 07 31 Dec 07 For personal use only nib Total policyholders 255,812 279,272 290,940 302,299 312,315 328,784 350,248 Policyholder growth 9.2% 9.2% 4.2% 3.9% 3
Slide 30: Data sheet – PHI industry
Data sheet – PHI industry FY03 / at FY04 / at FY05 / at FY06 / at 1H07 / at FY07 / at 1H08 / at For personal use only 30 Jun 03 30 Jun 04 30 Jun 05 30 Jun 06 31 Dec 06 30 Jun 07 31 Dec 07 PHI industry Total policyholders 4,649,268 4,671,430 4,708,420 4,806,754 4,883,236 5,008,329 5,111,415 Policyhol
Slide 31: Data sheet – nib normalised financials
Data sheet – nib normalised financials FY08 Prospectus For personal use only ($m) FY05 FY06 FY07 forecast 1H07 1H08 PROFIT & LOSS Premium revenue 530.7 611.9 666.0 750.7 328.3 370.9 Gross underwriting result 71.7 111.8 94.9 102.0 50.2 51.8 Net underwriting result 15.4 51.4 23.7 18.7 19.0 13.9 Invest
Slide 32: Normalised profit & loss reconciliation
Normalised profit & loss reconciliation Significant one-off costs in 1H08 re demutualisation and listing result in statutory loss For personal use only 1H08 1H07 % change ($m) Statutory Adjust Pro forma Statutory Adjust Pro forma 1H08 vs 1H07 Premium revenue 370.9 - 370.9 328.3 - 328.3 13.0% Net c
Slide 33: Balance sheet
Balance sheet Robust balance sheet remains ungeared For personal use only Balance sheet ($m) At Dec 07 Jun 07 Growth in non-current Health fund Health fund operating assets assets largely reflect investment in Current assets 28.5 26.6 our new head office Non-current assets 52.3 40.0 OSC is 9.8%
Slide 34: Normalised cash flow reconciliation
Normalised cash flow reconciliation 1H08 1H07 ($m) Statutory Adjust Pro forma Statutory Adjust Pro forma For personal use only Receipts from policyholders & customers 374.0 - 374.0 355.7 (26.0) 329.7 Payments to customers, suppliers, emp’ees (384.4) 11.1 (373.3) (342.5) 23.9 (318.6) Sub-total (10.4)
Slide 35: Disclaimer
Disclaimer The material in this presentation is a summary of the results of nib holdings limited (nib) for the six months ended 31 December 2007 For personal use only and an update on nib’s activities and is current at the date of preparation, 27 February 2008. Further details are provided in the Co
Slide 36: Results for the six months ended December 2007
For personal use only nib holdings limited Results for the six months ended 31 December 2007 Mark Fitzgibbon, MD & CEO Michelle McPherson, Deputy CEO & CFO 27 February 2008