Medibank Private Ltd. · ASX:MPL
Medibank Private — H1 2015 Earnings Presentation
28 slides from Medibank Private's earnings presentation, Feb 20, 2015
Slide 1: Medibank 2015 Half Year Results
MEDIBANK 2015 Half Year Results 20 February 2015 Presenters: George Savvides – Managing Director Paul Koppelman – Chief Financial Officer
Slide 2: Important Notice
IMPORTANT NOTICE The information contained in this presentation is for information purposes 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 particula
Slide 3: Group Summary
GROUP SUMMARY 1
Slide 4: On Track to Deliver Prospectus Earnings Forecast
ON TRACK TO DELIVER PROSPECTUS EARNINGS FORECAST • Group NPAT on a Pro forma basis up 10.8% to $151.2m • Health Insurance: − Premium revenue up 5.2% – Principal Policyholders up 0.9% − Gross margin up from 13.7% to 13.9% assisted by claims provision release 1 − Management expense cost down – MER imp
Slide 5: Group Financial Summary
GROUP FINANCIAL SUMMARY PRO FORMA Six months ended 31 Dec – Pro forma1 ($m) 1H14 1H15 Change % Revenue 3,148.5 3,269.7 3.8 Health Insurance operating profit 126.5 173.5 37.1 Complementary Services operating profit2 14.5 7.2 (50.3) Segment operating profit 141.0 180.7 28.1 Corporate overheads (11.8)
Slide 6: Group NPAT Reconciliation: Statutory to Pro Forma
GROUP NPAT RECONCILIATION: STATUTORY TO PRO FORMA Six months ended 31 Dec ($m) 1H14 1H15 Change % Statutory NPAT 71.0 143.8 102.5 Impairment expenses1 80.0 - n/a Net IPO transaction costs2 - 5.8 n/a 1H14 risk margin adjustment3 (15.8) - n/a Other4 1.3 1.6 n/a Pro forma NPAT 136.5 151.2 10.8 1. Write
Slide 7: Health Insurance
HEALTH INSURANCE 2
Slide 8: Health Insurance Result
HEALTH INSURANCE RESULT CONSTRAINED REVENUE GROWTH OFFSET BY MARGIN IMPROVEMENT • Premium revenue growth slowed Six months ended 31 Dec – Pro forma ($m) 1H14 1H15 Change % reflecting product downgrading and slight decline in market share Premium revenue 2,797.4 2,943.3 5.2 • Continued industry-wide
Slide 9: Drivers of Health Insurance Result
DRIVERS OF HEALTH INSURANCE RESULT FOCUS ON PROFITABLE GROWTH 1H15 Pro forma Health Insurance operating profit Drivers of Health Insurance result 1H15 Pro forma Health Insurance metrics $2,943m $173m $(235)m 5.9% #1 Premium revenue $(2,535)m 8.0% ● Population growth #4 Premium revenue growth of ● Po
Slide 10: Policyholders
POLICYHOLDERS MEMBERSHIP GROWTH…BEING PROACTIVELY MANAGED • Industry growth slowed and churn Six months to 31 Dec 1H14 1H15 Change % increased Principal Policyholders1 (thousand): 1,818.4 1,834.6 0.9 • Continued focus on Medibank brand - Medibank-branded policies 1,613.0 1,589.0 (1.5) share - ahm-br
Slide 11: Health Claims Costs
HEALTH CLAIMS COSTS PNIC DELIVERING; NORMALISED GROSS MARGIN SLIGHTLY DOWN • Health claims costs industry-wide Six months ended 31 Dec – continue to be driven by Pro forma ($m) 1H14 1H15 Change % − Increasing hospital utilisation rates Claims expense (2,468.7) (2,568.9) 4.1 − Health cost contract in
Slide 12: Management Expenses
MANAGEMENT EXPENSES CONTINUED REDUCTION IN MER • Continued reduction in management Six months ended 31 Dec – expenses and MER due to the Pro forma ($m) 1H14 1H15 Change % cost reduction program Premium revenue 2,797.4 2,943.3 5.2 − Employee costs down Management expenses (257.0) (234.7) (8.7) − Impr
Slide 13: Complementary Services
COMPLEMENTARY SERVICES medibank For Better Health
Slide 14: Complementary Services
COMPLEMENTARY SERVICES ONGOING BUSINESSES PROFIT UP; STRATEGIC REVIEW CONTINUES • Ongoing businesses1 revenue was Six months ended 31 Dec – flat at $328m and operating profit up Pro forma ($m) 1H14 1H15 Change % from $3.3m to $6.6m Revenue 368.8 331.5 (10.1) • Improvement largely driven by Gross pro
Slide 15: Investment Portfolio & Capital
INVESTMENT PORTFOLIO & CAPITAL 4
Slide 16: Investment Portfolio
INVESTMENT PORTFOLIO GROWTH ASSET ALLOCATION INCREASED TO 25% • Revised strategic Previous Current asset allocation Balance Portfolio target asset target asset implemented As at 31 Dec 2014 ($m) composition allocation allocation during the period Australian equities 121.3 6.5% 5.5% 6.0% Internationa
Slide 17: Investment Income
INVESTMENT INCOME BROADLY ON TRACK AT THE HALF • Investment income down primarily Six months ended 31 Dec – due to relatively lower returns Pro forma ($m) 1H14 1H15 Change % from equity markets and lower Average monthly balance: interest rates Growth 398.0 463.7 16.5 • Relative to Prospectus forecas
Slide 18: Capital
CAPITAL HEALTH INSURANCE RELATED CAPITAL WITHIN TARGET RANGE • Health Insurance related ($m) 30 Jun 2014 31 Dec 2014 capital of 12.6% of Total equity 1,393.9 1,298.9 premium revenue within Total qualifying subordinated debt - - targeted range of 12% to 14% Total capital 1,393.9 1,298.9 Less: Intangi
Slide 19: Other Financial Information
OTHER FINANCIAL INFORMATION 5
Slide 20: Financial Summary: Group
FINANCIAL SUMMARY: GROUP CORPORATE OVERHEADS, OTHER EXPENSES, TAX • Corporate overheads skewed Six months ended 31 Dec – Pro forma ($m) 1H14 1H15 Change % to second half due primarily to costs of being a listed entity Segment operating profit 141.0 180.7 28.1 Corporate overheads (11.8) (10.9) (7.6)
Slide 21: Balance Sheet
BALANCE SHEET STRONG, DEBT FREE BALANCE SHEET Change vs ($m) 31 Dec 2013 30 Jun 2014 31 Dec 2014 31 Dec 2013 (%) • Seasonal prepayments Cash and cash equivalents 752.7 708.0 470.8 (37.5) Financial assets at fair value through profit or mean that most loss 1,135.9 1,490.6 1,425.5 25.5 comparable bala
Slide 22: Cash Flow
CASH FLOW HEAVY SKEW TO SECOND HALF • Change in operating assets Six months ended 31 Dec ($m) 1H14 1H15 Change % and liabilities typically negative Operating profit1 69.8 154.1 120.8 in first half and positive in Changes in working capital2 (29.7) (40.4) 36.0 second half as premium prepayments gener
Slide 23: Outlook
OUTLOOK 6
Slide 24: Outlook
OUTLOOK • Management expects health insurance industry headwinds to continue with rising healthcare costs challenging affordability for customers, resulting in further product downgrades and churn • Medibank will continue to address these challenges by focusing on membership growth through its two-b
Slide 25: Q&A 2015 Half Year Results
Q&A 2015 Half Year Results medibank For Better Health
Slide 26: Appendix
APPENDIX 2015 Half Year Results
Slide 27: Change in Principal Policyholders
CHANGE IN PRINCIPAL POLICYHOLDERS Six months ended 31 Dec (thousand) 1H14 1H15 Change % Opening balance (Principal Policyholders1) 1,803.7 1,830.0 1.5 Acquisitions2 98.3 95.6 (2.8) Lapses2 83.5 91.0 8.9 Closing balance 1,818.4 1,834.6 0.9 – Acquisition rate3 5.4% 5.2% (20bps) – Lapse rate3 4.6% 5.0%
Slide 28: Glossary
GLOSSARY ADF Health Services The contract between the Commonwealth and Medibank Private Limited for the provision of a national integrated healthcare service to the Australian Contract Defence Force bps Basis points (1.0% = 100 bps) Commonwealth The Commonwealth of Australia Dec December EPS Earning