Nib Holdings Ltd · ASX:NHF
Nib — H1 FY2020 Earnings Presentation
39 slides from Nib's earnings presentation, Feb 24, 2020
Slide 1: FY20 half year results
FY20 half year results 24 February 2020 F Y 2 0 h a l f y e a r re s u l t s 1
Slide 2: Disclaimer
Disclaimer The material in this presentation is a summary of the results of nib holdings limited (nib) for the 6 months ended 31 December 2019 and an update on nib’s activities and is current at the date of preparation, being 24 February 2020. Further details are provided in nib’s half year accounts
Slide 3: Mark Fitzgibbon
• CLICK TO EDIT MASTER TEXT STYLES Mark Fitzgibbon Chief Executive Officer & Managing Director F Y 2 0 h a l f y e a r re s u l t s 3
Slide 4: Our purpose: your better health
Our purpose: your better health 6 months to 31 December 2019 164,339 27,081 1,872,955 3,023 Private hospital Public hospital Ancillary visits Knee & hip admissions admissions (including dental) replacements up 5.2% up 3.6% up 0.9% up 9.4% 19,664 17,699 4,731 $126.5m Rehab admissions Travel claims Me
Slide 5: 1H20 Group results
1H20 Group results Total Group revenue Underlying operating Net investment Net profit after tax1 profit income $1.3b $83.2m $12.6m $57.1m 1H19 $1.2b, up 6.4% 1H19 $114.3m, down 27.2% 1H19 $1.5m, up $11.1m 1H19 $74.3m, down 23.1% Statutory operating profit2 $73.2m (down 31.7%) Statutory EPS2 Non-arhi
Slide 6: 1H20 observations
1H20 observations • 1H20 result disappointing and indicative of current • Adjusting for outstanding claims reserve industry pressures and escalating competition. arhi releases/increases shows a decline in Group UOP of 1H20 on 1H19: 2.1% to $87.4 million2. o nib claims (including risk equalisation) ▲
Slide 7: Positive long-run EPS and TSR
Positive long-run EPS and TSR Statutory EPS (cps) TSR1 5 years to 31/12/2019 nhf ASX200 32.9 29.4 27.2 190.0 16.5 21.2 13.5 10.8 140.0 134.8% 11.3 90.0 16.4 15.9 16.4 52.9 12.6 40.0 9.9 (10.0) FY16 FY17 FY18 FY19 FY20 1H 2H 1. Source: Bloomberg. Total shareholder return represents the simple return
Slide 8: Making the world a better place
Making the world a better place Bushfire relief Aboriginal health programs Socially responsible investment • Three month health insurance • nib foundation will donate $1 million • Completed divestment from premium waiver. from unclaimed dividends for companies whose primary • Alternate option to sus
Slide 9: Michelle McPherson
• CLICK TO EDIT MASTER TEXT STYLES Michelle McPherson Chief Financial Officer & Deputy CEO F Y 2 0 h a l f y e a r re s u l t s 9
Slide 10: Group revenue & underlying operating profit
Group revenue & underlying operating profit $1,279.1m up 6.4% $83.2m down 27.2% Group underlying revenue1 Group underlying operating profit2 arhi iihi arhi iihi $1,045.4m $62.1m $62.6m $12.3m up 3.8% up 15.4% down 29.1% down 31.3% nz nib Travel nz nib Travel $118.9m $50.5m $11.1m $1.7m up 13.8% up 5
Slide 11: Australian residents health insurance
Australian residents health insurance Financial performance ($m) 1H20 1H19 Change Improved policyholder growth with nib accounting Premium revenue 1,044.4 1,006.1 ▲ 3.8% for ~38%4 of industry growth Claims expense excluding RE1 (754.8) (696.2) ▲ 8.4% Risk equalisation levy (126.5) (114.7) ▲ 10.3% •
Slide 12: Gross profit - arhi
Gross profit - arhi 220.0 • Product downgrading led by affordability concerns resulted in a 200.0 3.9 $3.7m unfavourable gross profit impact. Offering $750 excess (3.7) across our entire product range as part of PHI Reforms from (6.2) April 2019 improved affordability and impacted on favourable 180.
Slide 13: Claims expense – arhi
Claims expense – arhi Rolling 12 month change in total costs, hospital and ancillary benefits (actuarial incurred 1) per • Mental health benefits (hospital psychiatric services) a key person: arhi (including GU Health) driver of the increase between April 2018 and March 2019 due to mental health wai
Slide 14: International (inbound) health insurance
International (inbound) health insurance Financial performance ($m) 1H20 1H19 Change Business generating strong double digit top line growth Premium revenue 61.5 53.3 ▲ 15.4% with some re-setting of margins Claims expense (30.3) (20.0) ▲ 51.5% Other underwriting revenue 0.6 0.5 ▲ 20.0% • Impressive
Slide 15: New Zealand
New Zealand Financial performance ($m) 1H20 1H19 Change Stand-out performance with business growing revenue Premium revenue 119.0 104.5 ▲ 13.9% and earnings Claims1 (73.7) (63.5) ▲ 16.1% • Premium revenue ▲13.9% reflecting very strong policyholder growth and premium Management expenses (34.1) (31.5)
Slide 16: nib Travel
nib Travel Improved sales and operating income, but result below 1H20 Financial performance ($m) excluding 1H20 1H19 Change expectations QBE Travel • Sales ▲4.8% excluding acquisition of QBE Travel (completed May 19), including QBE Operating income 31.3 47.8 33.5 ▲ 42.7% Travel sales ▲86.5%. Acquisi
Slide 17: Investments, gearing, cash flow & capital
Investments, gearing, cash flow & capital 1H20 1H19 Change • Increase in net investment income reflects a return to more normal returns compared to the soft Net investment income ($m) 12.6 1.5 ▲ 740.0% equity performance encountered in 1H19. Net investment return (%) 1.3 0.1 ▲ 120bps • Finance costs
Slide 18: Capital summary
Capital summary ($m) 31 Dec 2019 Net assets 622.3 • As part of the review of internal capital targets following the nib/ GU Health fund merge the Board approved an increase in the internal capital target to allow for: Add: Borrowings (excluding bank overdraft) 232.7 o 75% write-off of deferred acqui
Slide 19: Mark Fitzgibbon
• CLICK TO EDIT MASTER TEXT STYLES Mark Fitzgibbon Chief Executive Officer & Managing Director F Y 2 0 h a l f y e a r re s u l t s 19
Slide 20: New members of executive team
New members of executive team Edward Close Matt Paterson Group Executive – Australian Residents Health Insurance Group Executive – Business Services F Y 2 0 h a l f y e a r re s u l t s 20
Slide 21: Business strategy
Business strategy Personalised Affordability and Grow the core Economies of Racing the Red healthcare sustainability (arhi) scope Queen (RRQ) F Y 2 0 h a l f y e a r re s u l t s 21
Slide 22: Personalisation and the member value proposition
Personalisation and the member value proposition Today Tomorrow Financial protection Financial protection • PHI cover defined by legislation. • Customised PHI cover based upon member’s individual health needs. • Tiered product selection based upon member self-assessment of their risk. • Optional and
Slide 23: Personalisation so far
Personalisation so far Joint venture with Cigna to create data Ongoing health management programs such as: science and healthcare company Honeysuckle Health Clinical Partners Ngāti Whātua Ōrākei Find a Provider and Going to Hospital Tool (including digital and online) Imminent launch of wellbeing ap
Slide 24: Near term outlook
Near term outlook arhi Adjacent businesses General • Organic net policyholder growth 2%- • Ongoing organic growth at rates • Emphasis and investment in 3% per annum. Looking to subject to market conditions. "personalisation" and Honeysuckle accelerate as part of • Net insurance margins for FY20 Heal
Slide 25: Guidance
Guidance FY20 UOP forecast to be at least $170m Statutory operating profit of at least $150m ($m) FY20 Statutory operating profit ~150 One-off transactions and M&A costs ~9 Amortisation of acquired intangibles ~11 GU Health 2.7 IMAN 0.7 nib Travel 3.8 NZ 3.5 Underlying operating profit ~170 F Y 2 0
Slide 26: Questions and answers
Questions and answers F Y 2 0 h a l f y e a r re s u l t s 26
Slide 27: Appendix
Appendix F Y 2 0 h a l f y e a r re s u l t s 27
Slide 28: Policyholder and other data
Policyholder and other data nib Group health insurance 1H20 1H19 Total persons covered 1,612,683 1,547,801 Australian residents health insurance 1,186,159 1,168,358 International (inbound) health insurance 200,988 172,771 New Zealand 225,536 206,672 Total policyholders 916,635 862,465 Australian res
Slide 29: Detailed income statement (underlying underwriting result)
Detailed income statement (underlying underwriting result) ($m) 1H20 1H19 Change Net premium revenue 1,227.6 1,163.9 5.5% - arhi 1,044.4 1,006.1 3.8% - iihi 61.5 53.3 15.4% - nz 119.0 104.5 13.9% - nib Travel 2.7 - n/a Net claims expense (841.5) (762.8) 10.3% - Hospital claims paid (arhi) (513.7) (5
Slide 30: Management expenses (arhi, iihi and nz)
Management expenses (arhi, iihi and nz) (commissions (commissions (commissions management management Amortisation underwriting underwriting of acquired intangibles amortised) marketing Marketing Marketing Marketing expenses expenses expenses expenses Marketing deferred) indirect indirect indirect (d
Slide 31: Other income and expenses
Other income and expenses1 ($m) 1H20 1H19 Change Other income Complementary insurances 1.4 1.4 - nib foundation income2 0.3 1.1 ▼ 72.7% Other 0.5 0.4 ▲ 25.0% Total other income 2.2 2.9 ▼ 24.1% Other expenses Complementary insurances expenditure (0.3) (0.4) ▼ 25.0% Corporate and share registry costs
Slide 32: Investment asset allocation
Investment asset allocation Consolidated Australian investment portfolio New Zealand investment portfolio nib foundation investment portfolio Allocation Net return Allocation Net return Allocation Net return Allocation Net return1 Balance at Balance at Balance at Balance at at 6 month to at 6 month
Slide 33: Gross profit - arhi
Gross profit - arhi $3.9m $(3.7)m $(6.2)m 240.0 33.3 220.0 22.7 27.3 21.8 200.0 (15.3) (3.5) (31.9) 195.2 (7.9) (10.0) (24.9) ($m) 180.0 (17.6) (21.3) 160.0 (4.8) 163.1 140.0 120.0 100.0 • Product downgrading led by affordability concerns resulted in a $3.7m unfavourable gross profit impact. Offerin
Slide 34: Gross profit - iihi
Gross profit - iihi $5.9m $0.2m $(4.2)m 45.0 9.4 40.0 1.3 (3.5) (0.2) (1.1) 35.0 (4.0) 33.3 (2.7) 30.0 (0.5) (0.8) 31.2 25.0 ($m) 20.0 15.0 10.0 5.0 - • Competition has led to minimal movements in average premiums in an environment of increasing claims leading to a $4.2m reduction that was more than
Slide 35: Gross profit - nz
Gross profit - nz $1.9m $2.5m 60.0 3.1 7.9 50.0 8.1 (8.5) (0.1) 45.3 40.0 (6.2) 41.0 ($m) 30.0 20.0 10.0 - • Gross margin ▲$4.3m (10.5%), reflecting the successful growth of the business. • Policyholder growth contributes $1.9m. • Premium adjustment and product mix contributes $7.9m to cover high cl
Slide 36: 5 year trends - arhi
5 year trends - arhi arhi gross margin (reported) arhi gross margin (adjusted for OSC movements) 18.6% 17.7% 17.5% 17.5% 19.4% 16.0% 16.3% 18.5% 18.0% 17.8% 17.8% 17.3% 17.3% 16.9% 15.2% 16.6% 16.9% 14.9% 16.0% 16.1% 15.6% 15.1% 14.8% 15.2% 15.3% 14.8% FY16 FY17 FY18 FY19 1H20 FY16 FY17 FY18 FY19 1H
Slide 37: 5 year trends - iihi
5 year trends - iihi iihi gross margin (reported) iihi gross margin (adjusted for OSC movements) 62.6% 60.8% 61.5% 63.8% 62.4% 64.3% 59.3% 60.9% 61.7% 62.5% 60.6% 65.0% 59.2% 59.9% 62.7% 64.4% 60.5% 61.0% 57.2% 57.3% 45.7% 50.7% 51.5% 44.1% 34.2% 33.0% FY16 FY17 FY18 FY19 1H20 FY16 FY17 FY18 FY19 1H
Slide 38: 5 year trends - nz
5 year trends - nz nz gross margin nz gross margin 42.9% 41.5% 39.7% 43.8% 42.2% 39.4% 43.3% 42.4% 42.5% 45.5% 39.8% 40.1% 39.2% 40.1% 38.5% 39.2% 38.1% 39.0% 41.9% 42.5% 41.1% 40.3% 39.5% 38.3% 37.5% 37.2% FY16 FY17 FY18 FY19 1H20 FY16 FY17 FY18 FY19 1H20 1H 2H FY 1H 2H FY F Y 2 0 h a l f y e a r r
Slide 39: Glossary
Glossary Term Definition Term Definition nib nib holdings limited 1H Six months ended/ending 31 December of the relevant financial year nib Travel nib Travel is a travel insurance distributor 2H Six months ended/ending 30 June of the relevant financial year niss nib international student services AP