Nib Holdings Ltd · ASX:NHF
Nib — 1H11 Earnings Presentation
33 slides from Nib's earnings presentation, Feb 21, 2011
Slide 1: Investor Presentation
INVESTOR PRESENTATION MONDAY 21 FEBRUARY 2011 2 ‘= © @ D S © ‘= O D — @ oe — © UL | nib holdings
Slide 2: Highlights
Highlights For personal use only 1H10 1H11 % Net underwriting profit1 $30.5m $40.9m 34.1% Net policyholder growth 2.4% 2.7% 17.4% Health Insurance Business (HIB) 9,236 policies 10,847 policies Net Investment income $33.6m $ $18.6m $ ((44.6)% ) Net Profit After Tax $43.1m $39.0m (9.5)% ROE2 1
Slide 3: Key metrics
Key metrics $m For personal use only ($m) 1H10 1H11 % Fav/(Unfav) Premium revenue 446.1 495.0 48.9 11.0 Management expenses1 (40 ) (40.7) (42 2) (42.2) (1 ) (1.5) 3 3.7 Net underwriting profit 30.5 40.9 10.4 34.1 Net underwriting profit (HIB*) 30.5 40.4 9.9 32.5 Net underwriting loss (OSHC*)
Slide 4: Policyholder growth – 1H11
Policyholder growth – 1H11 For personal use only * nib net policyholder growth in six months to 31 December 2010 NT Growth*: 27 Policies : 596 QLD Growth* :1,659 WA Market share :43,912 Growth*: 1,196 Policies : 6,978 SA Growth* :103 Market share: 6,626 NSW/ACT Growth*: 4,748 Market share : 294,264
Slide 5: Gross profit drivers 1H11 v 1H10
Gross profit drivers 1H11 v 1H10 120 29.6 0.3 24.8 For personal use only 110 Net policyholder growth $7 $7.6m 6m 100 23.5 15.9 Net product ($m) 90 mix $4.7m 0.5 7.6 14.3 2.6 0.0 83.1 80 9.0 71.2 70 60 Gross profit up 16.7% (or $11.9m) At 16.8% gross margin demonstrates usual half-on-half seasona
Slide 6: Management expenses
Management expenses Employment Mkting - Direct Mkting - Commission Management expenses of $42.2m up $1.5m on For personal use only IT Occupany Other MER (%) 1H10 due to OSHC ($0.3m) and OVC ($1.8m), partially offset by decrease in HIB ($0.6m). HIB gement expense ($m) 10.0% 9 1% 9.1% decrease inclu
Slide 7: New earnings streams & other income
New earnings streams & other income For personal use only ($m) 1H10 1H11 OSHC net underwriting loss - (0.3) OVC net underwriting profit - 0.8 Total new earnings streams - 0.5 (underwriting profit) Life & Funeral Insurance commission 0.1 0.2 Travel & other commission 0.1 0.2 Rental income 0.1 0.1 Oth
Slide 8: Investment return
Investment return Net investment return ($m) Net percentage return (%) For personal use only 50.0 40.0 15.9% 30.0 Investment return ($m) 10.5% 9.0% 20.0 5.7% 10.0 1.6% -0.4% $11.9 $7.5 $33.6 $44.5 $18.6 0.0 1H08 FY08 1H09 FY09 1H10 FY10 1H11 -6.5% -$1.8 -10.0 -$13.9 -20.0 Net portfolio returns of
Slide 9: Holding company and other subsidiary expenses
Holding company and other subsidiary expenses For personal use only ($m) 1H10 1H11 $m % Share registry – ongoing 0.9 0.7 (0.2) (22.2) Share registry – one off 1.0 0.2 (0.8) (80.0) M&A 0.0 0.7 0.7 - IMAN stamp duty on acquisition 0.0 0.9 0.9 - Other 1.4 1.5 0.1 6.2 TOTAL 3.3 4.0 0.7 22.7
Slide 10: NPAT summary of movement 1H11 v 1H10
NPAT summary of movement 1H11 v 1H10 For personal use only 60 2.6 0.0 2.7 2.2 15.0 9.3 0.5 0.6 50 ($m) 43.1 40 04 0.4 08 0.8 10 1.0 39.0 30 10
Slide 11: Dividend
Dividend For personal use only Interim dividend of 4.0 cps fully Ordinaryy Special p franked ($18.7m), reflects payout 8.0 ratio of 48% of 1H11 NPAT per share) 7.0 Interim dividend contains no 6.0 special p dividend dend (cents p 50 5.0 50 5.0 4.0 7.0 Dividend policy will continue to 3.0 3.0 2
Slide 12: Capital management
Capital management As part of the regular review of capital management the Board has determined that the internal For personal use only capital adequacy target be revised from a capital adequacy ratio of 1.4x (or a Capital/Risk Multiple of 2.35x) to a capital adequacy ratio of 1.3x (or a Capital/R
Slide 13: FY11 capital management initiatives
FY11 capital management initiatives For personal use only Capital at 30 June 2010, above internal prudential target of 1.4x ($m) (Capital/Risk Multiple of 2.35x): 144.5 Board’s revision to capital adequacy target from 1.4x at 30 June 2010 to 1.3x at 31 December 2010 29.3 On-market share buy back (2.
Slide 14: Cash flow
Cash flow For personal use only ($m) 1H10 1H11 $m % Net cash inflow/(outflow) from operations 20.1 27.1 7.0 34.8 Net cash inflow/(outflow) from investing (4.8) (24.7) (19.9) 414.6 Net cash inflow/(outflow) from financing (21.9) (27.3) (5.4) 24.7 Continued improvement in cash flow from operat
Slide 15: Market outlook & issues
Market outlook & issues For personal use only Healthcare spending to continue to escalate with increased reliance on private sector inevitable. Public system unlikely to cope with demand, costs pressures and community expectations Annual PHI system growth of around 3% ongoing Possible means te
Slide 16: Business strategy
Business strategy For personal use only Consolidate and build upon our core PHI organic growth efforts with emphasis on new or emerging i markets, k t policyholder li h ld retention t ti and policy “buy-up” Better manageg claims inflation with pparticular focus on utilisation and risk equalisati
Slide 17: Business outlook & guidance
Business outlook & guidance For personal use only FY11 net core PHI policyholder growth in order of 5 5% - 6.0% 5.5% 6 0% (22 (22,400 400 - 25,000 25 000 net new policies) and 5% - 6% ongoing FY11 net pre pre-tax tax underwriting profit of $55 – 58 million* (net underwriting margin 5.4% - 5.7%)
Slide 18: For personal use only
| nib holdings AjUO SSN [euOSsJed JOS
Slide 19: Appendix
APPENDIX AjUO SSN [euOSsJed JOS
Slide 20: Policyholder growth
Policyholder growth For personal use only nib (HIB) 1H09 FY09 1H10 FY10 1H11 Total policyholders 375,130 384,288 393,524 406,929 417,776 - Policyholder growth rate 2.7% 5.2% 2.4% 5.9% 2.7% Total sales 24,740 50,438 25,142 56,762 27,661 - Sales rate 6.8% 13.8% 6.5% 14.8% 6.8% Total lapses 14,999 31,5
Slide 21: Detailed income statement
Detailed income statement 1H11 v For personal use only ($m) 1H09 2H09 FY09 1H10 2H10 FY10 1H11 1H10 (%) Premium revenue 410.6 418.9 829.5 446.1 455.3 901.4 495.0 11.0 Cl i Claims expense (293 4) (293.4) (306 5) (306.5) (599 9) (599.9) (310 7) (310.7) (325 3) (325.3) (636 0) (636.0) (339 6) (339.6) 9
Slide 22: Key performance metrics
Key performance metrics For personal use only (%) 1H09 2H09 FY09 1H10 2H10 FY10 1H11 HIB Reported gross margin 15 5 15.5 13 9 13.9 14 7 14.7 16 0 16.0 13 7 13.7 14 8 14.8 16 4 16.4 Management expense ratio 10.4 9.3 9.9 9.1 10.0 9.6 8.2 Net underwriting margin 5.1 4.6 4.8 6.8 4.6 5.2 8.2 (%) 1H11 OSH
Slide 23: Detailed management expenses
Detailed management expenses For personal use only Total Marketing Marketing Total MER ($m) Employment IT Occupancy Other Management (Direct) (Commisions) (%) Expenses HIB 1H09 18.4 8.5 0.9 3.0 5.5 6.5 42.8 10.4 2H09 17.3 8.7 1.2 2.7 3.2 5.9 39.0 9.3 FY09 35.7 17.2 2.1 5.7 8.7 12.4 81.8 9.9 1H10 18.
Slide 24: Claims expense
Claims expense H Hospital it l claims l i iinflation fl ti For personal use only n ib In d ustry n ib service cost n ib utilisation n ib an n ual d rawing rate inflation (per SEU) incl. RE 25.0% 20 0% 20.0% 15.0% 10.0% 5.0% 0 0% 0.0% -5.0% -10.0% Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-
Slide 25: Investments
Investments nib transitioned to MLC products as its investment asset consultant (fully effective October 2010) For personal use only Below table provides investment return for six months to 31 December 2010 (noting returns may not be for entire period due to transition) and investment allocation
Slide 26: Capital adequacy
Capital adequacy For personal use only 2.5 2 00 2.00 2.03 2.0 1.88 1.86 1.72 1.64 1.61 1.50 1.51 1.52 1 44 1.44 1 46 1.46 1.5 Current internal target 1.3x 10 1.0 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 nib Board revised capital adequacy target from 1 1.4
Slide 27: Regulatory capital requirements
Regulatory capital requirements $145.4m of surplus capital above internal target (1.3x) after allowing For personal use only for interim dividend Health Fund capital Group capital allocation (at 31 December 2010) (at 31 December 2010) $94.9m $104.4m $41.0m $41.0m $198.2m $405 4 $405.4m $87.9m $24.4m
Slide 28: Balance Sheet
Balance Sheet ($m) 31 Dec 09 30 June 10 31 Dec 10 For personal use only Current assets Cash and cash equivalents 161.5 197.4 171.6 Financial assets at fair value through p&l 259 2 259.2 264 4 264.4 274 1 274.1 Other current assets 35.4 61.8 48.6 Total current assets 456.1 523.6 494.3 Non-current ass
Slide 29: Financial results – underlying results
Financial results – underlying results For personal use only Underlying results split out investment income between: Normalised investment income for 1H11– calculated on the basis of a 5.2%* (1H10: 55.5% 5%*)) assumed return over average investment assets for the period Investment experience – d
Slide 30: Data sheet – nib
Data sheet – nib For personal use only nib 1H07 FY07 1H08 FY08 1H09 FY09 1H10 FY10 1H11 HIB Total policyholders 312 315 312,315 328 784 328,784 350 248 350,248 365 389 365,389 375 130 375,130 384 288 384,288 393 524 393,524 406 929 406,929 417 776 417,776 - Policyholder growth 3.3% 8.8% 6.5% 11.1% 2
Slide 31: Data sheet – PHI industry
Data sheet – PHI industry By financial year intervals For personal use only FY06 FY07 FY08 FY09 FY10 PHI industry Total Policyholders 4,806,754 5,008,329 5,219,567 5,390,739 5,549,338 - Policyholder growth 2.1% 4.2% 4.2% 3.3% 2.9% Persons Covered 10,189,552 10,561,848 10,942,616 11,257,885 11,561,29
Slide 32: Disclaimer
Disclaimer For personal use only The material in this presentation is a summary of the results of nib holdings limited (nib) for the six months ended 31 December 2010 and an update on nib’s activities and is current at the date of preparation, 21 February 2011. Further details are provided in the Co
Slide 33: For personal use only
INVESTOR PRESENTATION MONDAY 21 FEBRUARY 2011 2 ‘= © @ D S © ‘= O D — @ oe — © UL | nib holdings