Nib Holdings Ltd · ASX:NHF
Nib — FY2018 Earnings Presentation
35 slides from Nib's earnings presentation, Aug 20, 2018
Slide 1: 2018 full year results investor presentation
2018 full year results investor presentation 20 August 2018 1
Slide 2: Disclaimer
disclaimer The material in this presentation is a summary of the results of nib holdings limited (nib) for the twelve months ended 30 June 2018 and an update on nib’s activities and is current at the date of preparation, 20 August 2018. Further details are provided in nib’s full year accounts and re
Slide 3: Mark Fitzgibbon, CEO & Managing Director
mark fitzgibbon chief executive officer & managing director 3
Slide 4: Our purpose
our purpose $1.7b 258,868 1,093,125 total claims paid1 private hospital admissions dental visits 9.6% 8.7% 10.3% 2,615,760 53,171 23,906 ancillary visits (excl dental) public hospital admissions travel claims processed2 6.9% 5.1% ▼ 5.4% female $17.3m $4.0m 57% representation NEDs 1,323 nib foundatio
Slide 5: FY18 highlights
fy18 highlights Group underlying revenue UOP net investment income NPAT $2,235.1m $184.8m $29.6m $133.5m 11.5% 20.2% 3.5% 11.1% Statutory operating profit1 $169.0m (12.2%) adjacent businesses statutory EPS1 contribution arhi net promoter score2 full year dividend 29.4cps 28.7% 20.0cps to Group UOP
Slide 6: Michelle McPherson, CFO & Deputy CEO
michelle mcpherson chief financial officer & deputy ceo 6
Slide 7: Group revenue & underlying operating profit (UOP)
group revenue & underlying operating profit (uop) Strong operating performance boosted by top line and earnings growth Group underlying revenue1 Group UOP3 $2,235.1m $184.8m ▲11.5% ▲20.2% arhi iihi arhi iihi $1,872.8m $94.7m $130.7m $29.6m ▲12.1% ▲25.9% ▲22.1% ▲16.5% nz2 WNG nz2 WNG $198.1m $66.1m $
Slide 8: Australian residents health insurance (arhi)
australian residents health insurance (arhi) Financial performance ($m) FY18 FY17 Change Double digit earnings growth with UOP up Premium revenue 1,871.2 1,669.0 12.1% more than 22% Claims expense1 (1,544.5) (1,401.2) 10.2% • Premium revenue up 12.1% due to policyholder growth, 2017 premium adjustme
Slide 9: Claims inflation (arhi)
claims inflation (arhi) Change in claims per person (%) Change in revenue per person (%) nib1 vs industry - 12 months rolling nib1 vs industry - 12 months rolling We are experiencing lower levels of claim inflation But revenue growth is also being impacted by lower premium increases and downgrading
Slide 10: GU Health acquisition
GU Health acquisition Positive result with business integration and transition on-track • Contributed $11.0m to Group UOP across eight months of ownership1. • Added approximately 34,000 policies. • Group synergies being realised in particular shared corporate services, provider contracting and claim
Slide 11: International (inbound) health insurance (iihi)
international (inbound) health insurance (iihi) Financial performance ($m) FY18 FY17 Change Impressive top line performance drives Premium revenue 93.3 74.8 24.7% UOP growth Claims expense (36.6) (28.0) 30.7% • Surpassed more than 160,000 international students and Other underwriting revenue 1.4 0.4
Slide 12: New Zealand
new zealand Financial performance ($m) FY18 FY17 Change Solid result with earnings stable Premium revenue (NZD) 214.9 210.9 1.9% • In NZD premium revenue ▲1.9% with loss of corporate UOP (NZD) 27.4 26.4 3.8% group in 2H17 offset by policyholder growth in other channels and premium adjustments. Premi
Slide 13: World Nomads Group (WNG)
World Nomads Group (WNG) Local sales and ‘going global’ strategy showing progress with UOP ▲8.0% Financial performance ($m) FY18 FY17 Change Gross written premium1 142.0 131.8 7.7% • Strong increase in operating income driven by international policy sales (▲16.5%), notably growth in the USA, our Ope
Slide 14: Acquisition of QBE Travel insurance
acquisition of QBE Travel insurance • Acquisition of QBE Travel, Australia’s 4th largest travel insurance distributor announced on 3 August 2018 for total consideration of up to $25m1. • The acquisition includes the distribution and claims capability of QBE Travel, but excludes capital supporting th
Slide 15: Investments, gearing, cash flow & capital
investments, gearing, cash flow & capital Capital metrics solid FY18 FY17 Change Net investment income ($m) 29.6 28.6 3.5% • Funds invested include addition of GU Health portfolio. Net investment return (%) 3.5 4.1 (60)bps • Increase in debt, finance costs and gearing due to GU Health acquisition (a
Slide 16: Capital management & APRA
capital management & APRA APRA has noted that a review of the Australian PHI capital standards is likely to commence later this calendar year and we anticipate any revised standards would be in place from FY21 at the earliest. nib has a range of capital management levers to manage a transition in th
Slide 17: Dividend reinvestment plan (DRP)
dividend reinvestment plan (drp) Provides shareholders a convenient way to increase shareholding as well as provide nib a flexible capital accumulation lever • The DRP will be available for the FY18 final dividend to be paid on 5 October 2018. • Shares allocated under the DRP for the FY18 final divi
Slide 18: Business strategy, key issues, outlook & guidance
business strategy, key issues, outlook & guidance 18
Slide 19: Business strategy
business strategy Personalised healthcare Better “personalise” our relationship with members and customers and the products and services we connect them with through technology and data science. As such, become a trusted “health partner” as a means of enhancing the value proposition, differentiating
Slide 20: Key issues
key issues • PHI participation and affordability • Claims inflation • Capital standards • Government policy (and possible 2% premium cap) • Technology and data science • Industry consolidation (domestic and global) • Sustainability and social licence (ESG) 20
Slide 21: A bit about China
a bit about china • Business establishment continues within budget (will be capitalised circa $12m to fund five year plan). • Appointment of JV CEO in July 2018. • Positive and ongoing engagement with regulator through the licensing process. • Building a strong relationship with Tasly. • Objective r
Slide 22: Outlook
outlook Australian (arhi) and NZ markets remain difficult with modest growth due to macroeconomic factors including affordability and negligible growth in discretionary spending. Pursuing arhi net policyholder growth of 3%-4%, FY19 net margin expected at top end of 5%-6% range. Federal Opposition’s
Slide 23: Guidance
guidance • FY19 UOP forecast to be at least $180m ($m) FY19 (statutory operating profit of at least Statutory operating profit ~159 $159m). One-off transactions and M&A ~11 costs • FY19 investment returns in line with Amortisation of acquired 9.5 internal benchmarks. intangibles GU Health 2.7 • Ordi
Slide 24: Questions & answers
questions & answers 24
Slide 25: Appendix
appendix 25
Slide 26: Policyholder & other data
policyholder & other data nib Group health insurance FY18 FY17 Total persons covered 1,526,736 1,391,509 Total policyholders 842,676 767,672 - Australian residents health insurance 594,762 549,602 - International (inbound) health insurance 145,218 118,149 - nib New Zealand 102,696 99,921 arhi1 Net p
Slide 27: Detailed income statement (underlying underwriting result)
detailed income statement (underlying underwriting result) ($m) FY18 FY17 Change Net premium revenue 2,162.6 1,943.1 11.3% - arhi 1,871.2 1,669.0 12.1% - iihi 93.3 74.8 24.7% - nz 198.1 199.3 (0.6)% Net claims expense (1,459.6) (1,343.8) 8.6% - Hospital claims paid (arhi) (933.1) (842.3) 10.8% - Anc
Slide 28: UOP to NPAT
uop to npat ($m) FY18 FY17 Change • Acquisition of GU Health during 1H18 drove increase in M&A costs. Underlying Operating Profit 184.8 153.7 20.2% • Increase in one-off costs includes China JV, GU Health Amortisation of acquired intangibles (8.4) (7.6) 10.5% integration costs and legal fees. arhi (
Slide 29: Management expenses (underwriting businesses)
management expenses (underwriting businesses) Amortisation of (Commissions (Commissions (Commissions Underwriting Management Management Intangibles Underlying amortised) Marketing Marketing Marketing Marketing Expenses Expenses Expenses Expenses deferred) Acquired Indirect Indirect Indirect Other Pa
Slide 30: Premium payback (PPB)
premium payback (ppb) Movement in central estimate of PPB liability ($m) FY18 FY17 Opening balance – central estimate 21.4 25.6 Funding – new premium less medical claims (discounted) 2.6 2.9 • The PPB liability is matched with investments of Payouts (normal) (3.9) (4.9) approximately the same durati
Slide 31: Other income & expenses (excluding segments)
other income & expenses (excluding segments) Other income FY18 FY17 Change Complementary insurance 2.6 2.5 4.0% Sundry income 0.8 0.21 300.0% Digital Health Ventures income - 0.1 NA Total other income 3.4 2.8 21.4% Other expenses Complementary insurance expenditure (1.2) (0.6) 100.0% Share registry
Slide 32: Investment asset allocation
investment asset allocation Consolidated Australian Investment Portfolio GU Investment Portfolio New Zealand Investment (excluding GU) Portfolio Balance Allocation Net investment Allocation Net investment Allocation Net investment Allocation at at 30/06/2018 at 30/06/2018 income at 30/06/2018 income
Slide 33: Operating cash flow
operating cash flow FY18 FY17 Change Cash flows from operating activities Receipts from policyholders and Operating cash flow Underlying operating profit customers (inclusive of GST) 2,316.4 2,063.1 12.3% 220 Payments to policyholders and customers (1,677.1) (1,558.6) 7.0% Receipts from outwards rei
Slide 34: Capital management
capital management nib has a number of subsidiaries that are each subject to regulatory minimum capital requirements imposed by the prudential regulator (APRA in Australia) and (RBNZ in New Zealand) Current levels of capital are consistent with the expectations of the regulators based on the current
Slide 35: Glossary
glossary TERM DEFINITION TERM DEFINITION Six months ended/ending 31 December of the relevant financial Net premium Premium revenue net of reinsurance 1H year revenue 2H Six months ended/ending 30 June of the relevant financial year nib nib holdings limited APRA Australian Prudential Regulation Autho