NIB Holdings Ltd · ASX:NHF
NIB — Investor Day (June 2013)
51 slides from NIB's investor day presentation, Jun 14, 2013
Slide 1: ASX announcement: 2013 nib strategy briefing
nib holdings limited t 13 14 63 Head Office f 02 4925 1999 22 Honeysuckle Drive Newcastle NSW 2300 e nib@nib.com.au abn 51 125 633 856 w nib.com.au 14 June 2013 The Manager Company Announcements Australian Securities Exchange Limited Level 4, Bridge Street SYDNEY NSW 2000 Subject: 2013 nib strategy
Slide 2: 2013 Strategy Briefing
2013 Strategy Briefing Friday 14 June 2013 1
Slide 3: Welcome & Strategic Update
Welcome & Strategic Update Mark Fitzgibbon Chief Executive Officer & Managing Director 2
Slide 4: Agenda
Agenda Time Topic Presenter 9.00am Business Strategy update Mark Fitzgibbon - CEO & Managing Director 10.00am Finance Michelle McPherson - Chief Financial Officer 10.30am Morning tea arhi Organic growth Rhod McKensey - Group Manager, arhi 10.45 am Our own efforts and role of intermediaries James Bar
Slide 5: Strategic Plan
Strategic Plan OUR VISION nib is a leading financier of the nation’s healthcare spending with a reputation for innovative products, value for money, outstanding customer service, corporate social responsibility and strong shareholder returns. OUR MISSION To help people afford healthcare when and whe
Slide 6: Industry trends
Industry trends We’re spending more and more on our healthcare. Government’s relative funding contribution cannot be sustained. Inevitably, the private sector will play an increased role. International cross border health care is accelerating. 5
Slide 7: Business Strategy
Business Strategy Grow our Australian residents health insurance business organically at circa 10% annual premium growth (4-5% 1 policyholder growth) through building national brand presence and with an emphasis on <40 market (Virgin Green), >55 market (Virgin Silver), other tactical niche opportuni
Slide 8: nib Group Structure
nib Group Structure Mark Fitzgibbon Managing Director & CEO Vacant Justin Vaughan Brendan Mills Rhod McKensey Michelle McPherson Group Manager Group Manager Rob Hennin Chief Information Group Manager Chief Financial Officer International & New Benefits & Provider nib New Zealand CEO Officer arhi / D
Slide 9: Possible change of Federal Government implications
Possible change of Federal Government implications Recent legislative changes remain in place (income testing and indexation of the Australian Government Rebate and removal of Australian Government Rebate from LHC loading). Sale of Medibank Private Expanded role for PHI? Denticare? Possible
Slide 10: Finance Update
Finance Update Michelle McPherson Chief Financial Officer 10
Slide 11: Financial targets & guidance – FY13
Financial targets & guidance – FY13 Group insurance premium revenue for FY13 of $1.2b - $1.3b. Forecast FY13 consolidated pre-tax net underwriting profit excluding non- cash amortisation of intangible assets on acquisitions (TMIL and IMAN) is expected to be at the low end of $75m - $78m guidance
Slide 12: Financial targets & guidance – FY13
Financial targets & guidance – FY13 FY13 nib New Zealand net underwriting profit excluding non-cash amortisation of intangible assets on acquisition is expected to be in the range of $5m - $7m. Acquisition of TOWER will be EPS accretive in FY13 (excluding acquisition costs and non-cash amortisatio
Slide 13: Capital management & dividend
Capital management & dividend As at 31 March 2013 nib had $33.1m in available capital above internal prudential requirements. FY13 final dividend will be in range of 60-70% FY13 NPAT. New Capital Standards not anticipated to have a material impact on our capital requirements. PHIAC issued Ro
Slide 14: arhi Organic Growth
arhi Organic Growth Rhod McKensey Group Manager Australian Residents Health Insurance James Barr Group Manager Marketing & Products 15
Slide 15: Agenda
Agenda Industry Growth and Outlook Regulatory Changes Tactics New Product Range New Customer Acquisition Customer Retention Focus for the next 12 months 16
Slide 16: Industry growth & outlook
Industry growth & outlook Annual Policyholder Growth - 12 months to 31 March 14.0% nib Industry 12.1% 12.0% 10.0% 8.0% 6.0% 5.6% 5.6% 5.6% 5.6% 4.9% 5.0% 4.0% 3.6% 3.4% 3.4% 3.1% 2.7% 2.0% 0.0% Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Source: PHIAC and company data Despite recent regulatory chang
Slide 17: Regulatory changes & impact
Regulatory changes & impact Medicare Levy Surcharge – changes to income thresholds (2010) 1 - People without PHI pay an extra 1% to 1.5% in tax if their income exceeds certain thresholds and don’t have appropriate hospital cover. Government aligned income thresholds with annual increases in average
Slide 18: Tactics
Tactics Continue to grow organically through building brand awareness in the key states of NSW, QLD, VIC and WA targeting the Under 40’s new to category market segment; Over 55’s market segment. Focus on value based selling to further increase policy “buy up”. Maintain marketing and retail
Slide 19: Channel strategy
Channel strategy Sales Channel Mix by Financial Year 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% FY08 FY09 Call Centre Corporate FY10 Other Retail FY11 Retail Brokers Web FY12 FY13 YTD Source: Company data The retail broker channel continues to grow and will account for around 30% of sales in FY13
Slide 20: Retail brokers
Retail brokers Retail brokers expected to account for ~30% of all policyholder sales in FY13. Why we use aggregators Continuing consumer trend to use aggregators Only pay for sales we get (low risk investment) Profitable Scalable (in terms of investment and sales) Access to niche segme
Slide 21: New customer acquisition
New customer acquisition 35% Effective Commission - 6 Mths Rolling $600 30% $500 25% $400 20% $300 15% $200 10% $100 5% $0 0% Jul-201 0 Jul-201 1 Jul-201 2 Feb-20 10 Mar-20 10 Jun-20 10 Jan-20 11 Feb-20 11 Mar-20 11 Jun-20 11 Jan-20 12 Feb-20 12 Mar-20 12 Jun-20 12 Jan-20 13 Feb-20 13 Mar-20 13 Apr
Slide 22: New product range – average premium
New product range – average premium Monthly Sales Average Premium Income (API) $2,500 $2,400 $2,300 Annual API $2,200 $2,100 $2,000 $1,900 New product launch $1,800 $1,700 $1,600 $1,500 Source: Company data During March 2013 nib launched a new product range which allows customers to better tailor
Slide 23: New product range – Over 55s
New product range – Over 55s 55+ Proportion of Total Sales 25.0% 20.0% 15.0% New product launch 10.0% 5.0% 0.0% Source: Company data The new products have proven to be a “hit” with the over 55s segment. The proportion of sales to over 55s has increased significantly. This change is consistent ac
Slide 24: Retention
Retention Average industry retention index* 0.94 0.92 0.90 0.88 0.86 0.84 Restricted Insurers Open Insurers 0.82 nib 0.80 2007-08 2008-09 2009-10 2010-11 2011-12 Source: PHIO and company data nib’s lapse increase line with the launch of our Virgin Green Strategy in FY07. nib’s lapse experience. in
Slide 25: Retention – Net Promoter Score
Retention 30% Net Promoter Score 25% 20% 15% 10% 5% 0% Source: Company data We have worked to create a customer-focused culture. Introduced the Net Promoter Score* in July 2010 (survey sent to customers following contact with nib). Despite some testing times we’ve made solid progress. * NPS qu
Slide 26: Customer survival rate
Retention Retention Rate by Net Promoter Score 100.0% 10 95.0% 9 8 Customer survival rate 90.0% 7 6 85.0% 5 4 80.0% 3 2 75.0% 1 0 70.0% No Response 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Months since NPS received Source: Company data NPS correlates with a customer’s reten
Slide 27: Specific retention actions
Retention Specific retention actions New product suite designed to provide customers with greater value for money by providing more choice and tailored products to better suit their needs. Develop a more effective save and win back process via dedicated call centre retention team. Outbound cal
Slide 28: Focus for the next 12 months
Focus for the next 12 months Brand Continue to invest in sponsorships and media to maintain/build a strong brand in four key states. Focus on 20-39 (Virgin Green) and 55 Plus (Virgin Silver) segments. Distribution Web – Grow the channel through continued investment. Ensure we stay ‘ahead of the
Slide 29: arhi Claims Management & Premium Pricing
arhi Claims Management & Premium Pricing Rhod McKensey Group Manager Australian Residents Health Insurance Gavin Ward Business Intelligence Manager 31
Slide 30: Claims overview
Claims overview Overall inflation is tracking slightly higher than expectations. For the 12 months to 31 March 2013 per person hospital (including medical, prostheses and risk equalisation) costs have increased by 4.6% (4.4% pre risk equalisation), in line with the industry average of 4.3%. Our
Slide 31: Hospital claims
Hospital claims Inflation (12 months to 31 Mar-13) Annual $m Total Drawing rate per person Setting/service nib nib Industry nib Industry Private 317.8 10.1% 6.8% 4.5% 3.7% Public 58.0 12.5% 16.6% 6.8% 13.6% Day 17.3 20.2% 8.7% 14.1% 5.5% Prostheses 76.0 7.4% 5.6% 1.9% 2.5% Medical 72.7 8.0% 6.9% 2.5
Slide 32: Ancillary claims
Ancillary claims Inflation (12 months to 31 Mar-13) Annual $m Total Drawing rate per person % of costs* Service nib nib Industry nib Industry nib Industry Dental 132.0 11.1% 9.6% 5.2% 5.0% 56% 52% Optical 45.4 7.6% 8.3% 1.9% 3.8% 56% 55% Physiotherapy 23.5 11.0% 11.5% 5.0% 6.8% 60% 51% Chiropractic
Slide 33: Claims strategy & outlook
Claims strategy & outlook New Group Manager Benefits will be heavily involved in benefit design, claims analysis, consumer empowerment, disease prevention/management and hospital/provider contracting across the entire nib Group (Australia, New Zealand, workers, students, nib Options). Key focus
Slide 34: Pricing
Pricing The 2013 premium approval process was different to previous years: PHIAC took the lead role in the assessment of submissions – previously it was led by the Department of Health & Ageing. The information required in the submission was similar to previous years. This year’s process was mor
Slide 35: nib New Zealand
nib New Zealand Update on TOWER New Zealand acquisition Rob Hennin Chief Executive Officer nib New Zealand 38
Slide 36: nib New Zealand Business Strategy
nib New Zealand Business Strategy Business Strategy Position and develop our new business in New Zealand as a challenger and grow the market and our share. Tactics Get the business ready: Right people on the bus, transition work, system enhancements, process improvements Direct to consumer off
Slide 37: Transition progress
Transition progress nib acquired Tower Medical Insurance Limited in November 2012 for ~AU$81.3m (including approximately AU$7.9m in surplus capital). New Structure Board of Directors Appointment of Alan Clarke as Chairman. Board Members also include nib Group MD/CEO as well as 3 NEDs from
Slide 38: nib New Zealand structure
nib New Zealand structure Chief Executive Officer Rob Hennin Finance & Corporate Services Operations Distribution Product & Marketing Nick Corey David White Rachael Savage Kathy Crispin (effective 1 July 2013) 41
Slide 39: New Zealand market
New Zealand market Australia New Zealand A$1,499.5bn A$175.4bn (NZ$209.3nb) GDP 10.8% growth over four years1 7.5% growth over four years Population 22.8mm 4.4mm Number of insured people 10.76mm (46.9%) 1.34mm (30.2%) Inflation 2.5% 0.9% Unemployment 5.5% 6.2% Health spend (% of GDP) 9.3% 10.5% Heal
Slide 40: New Zealand health care system
New Zealand health care system New Zealand residents may have access to a Government funded or subsidized healthcare system which provides primary, secondary and emergency health services. The public health system (“PHS”) provides health services through public hospitals and public sector genera
Slide 41: Industry players & distribution
Industry players & distribution Insurer Market share Premiums (NZ$mm)² Structure Friendly Society 65.6% 722.7 Also provides travel and student insurance Owns Private Hospitals 13.5% 148.5 nib acquired TOWER Medical in December 2012 Subsidiary of Commonwealth Bank 7.6% 83.7 Health insuran
Slide 42: Strategic milestones
Strategic milestones Months (2012 – 2013) Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Oct Phase 1 Phase 2 Phase 3 Phase 4 Phase 1 (Nov – Dec 2012) Phase 3 (Feb – Oct 2013) Complete acquisition of TOWER Medical Begin synergy realisation, system enhancements and Appoint interim management team
Slide 43: What we like and don’t like
What we like and don’t like What we like Flexibility in product pricing and design Opportunity to increase penetration and grow market share Low competitor investment in brand, product innovation and online capability Opportunity to better manage claims Engaged workforce Lack of competit
Slide 44: New Ventures – International
New Ventures – International Mark Fitzgibbon Chief Executive Officer & Managing Director Rebecca Urane Manager nib Options 48
Slide 45: International Workers Health Insurance
International Workers Health Insurance As at 30 April 2013 approximately 110,000 457 visa holders in Australia. FY12 industry GWP of $170m (excluding General Insurers), major PHI competitors include Medibank, BUPA and Australian Unity. FY13 forecast: High single digit net policyholder growth
Slide 46: International Students Health Insurance
International Students Health Insurance Expected to break even in FY13. Forecast approximately 9,000 polices by 30 June 2013 (3,328 policies 30 June 2012). Cultural Missions & As at 31 March 2013, approximately Embassies 332,000 student visa holders in Australia. FY12 GWP for industry estima
Slide 47: nib options – the opportunity
nib options– the opportunity Market for cosmetic treatment and medical travel is undeveloped Opportunity for a Accelerating company with mobility of people brand, expertise searching for care and resources to and choice corporatise Burgeoning demand for nib Model can be replicated healthcare Options
Slide 48: nib options – Business Strategy
nib options – Business Strategy Leverage nib’s brand reputation and distribution to support and grow the market for cosmetic, dental and surgical treatment both overseas and here in Australia. Invest strongly in products, marketing and sales capability based upon a philosophy that we are helping peo
Slide 49: nib options – Business Model
nib options – Business Model nib Options • Markets and advertises products and packages both in Australia and overseas • Directs sales enquiries and service Pacific Smiles Group Realsurgeons Realself (PSG) • Contracts with surgeons, facilities and other relevant Continues to market Receive dental cl
Slide 50: nib options – Financial Assumptions
nib options – Financial Assumptions It’s estimated it will take 6 months to launch nib Options with a targeted “go live” date of November 2013. Forecasting 1,000+ sales in Australia in FY14 (with 15% growth year on year). Forecasting 1,000+ sales overseas in FY14 (with 20% growth year on year)
Slide 51: 2013 Strategy Briefing
2013 Strategy Briefing Friday 14 June 2013 56