Slide 1: nib 2015 Half Year Results
nib 2015 HALF YEAR RESULTS INVESTOR PRESENTATION MONDAY 23 FEBRUARY 2015
Slide 2: Mark Fitzgibbon, CEO and Managing Director
MARK FITZGIBBON CEO AND MANAGING DIRECTOR
Slide 3: 1H15 Group Summary
1H15 GROUP SUMMARY • Group premium revenue up 9.1% to $802.3m (1H14: $735.4m). • Group operating profit up 1.7% to $42.1m (1H14: $41.4m) 1. • Australian residents health insurance (arhi) operating profit up 10.3% to $37.5m (1H14: $34.0m) with net margin of 5.3% (1H14: 5.2%). • International workers
Slide 4: Performance Metrics: Premium Revenue and Operating Profit
PERFORMANCE METRICS Group Premium Revenue Group Operating Profit $446.1m $495.0m $554.4m $612.8m $735.4m $802.3m $27.9m $37.8m $41.7m $34.9m $41.4m $42.1m 1H10 1H11 1H12 1H13 1H14 1H15 1H10 1H11 1H12 1H13 1H14 1H15 4
Slide 5: Performance Metrics: Return on Equity and EPS
PERFORMANCE METRICS Return On Equity* Earnings Per Share 18.0% 14.8% 18.0% 21.7% 21.9% 21.4% 8.7cps 8.0cps 8.2cps 8.3cps 9.0cps 9.4cps 1H10 1H11 1H12 1H13 1H14 1H15 1H10 1H11 1H12 1H13 1H14 1H15 * Using average shareholders’ equity over rolling 12 month period 5
Slide 6: Performance Metrics: Dividends and Net Promoter Score
PERFORMANCE METRICS Dividends (interim) Net Promoter Score* NPS (Australia) NPS (NZ)* 30.00% 20.00% 10.00% 0.00% -10.00% -20.00% -30.00% 2.0cps 4.0cps 4.25cps 5.0cps 5.25cps 5.5cps 1H10 1H11 1H12 1H13 1H14 1H15 * nib New Zealand acquired in November 2012, with NPS reporting commencing August 2013 6
Slide 7: Michelle McPherson, CFO and Deputy CEO
MICHELLE MCPHERSON CHIEF FINANCIAL OFFICER & DEPUTY CEO
Slide 8: Group Income Statement
GROUP INCOME STATEMENT ($m) 1H15 1H14 %* Group premium revenue1 802.3 735.4 9.1% Claims expense1 (560.6) (501.1) 11.9% Risk equalisation (94.7) (100.9) (6.1)% State levies (14.2) (14.1) 0.3% Premium payback liability movement (0.6) 2.7 (121.0)% Gross profit 132.2 122.1 8.3% - Gross profit margin 16.
Slide 9: arhi Key Metrics
arhi KEY METRICS 1H15 1H14 %* Total policyholders 491,381 484,541 1.4% - Net policyholder growth (%) 0.9 2.6 (1.7)% Net new policyholders 4,587 12,277 (62.6)% Total customers (persons covered) 967,461 956,207 1.2% Total sales 32,504 37,002 (12.2)% - Sales rate (%) 6.7 7.8 (1.1)% - Sales new to categ
Slide 10: arhi Key Metrics
arhi KEY METRICS ($m) 1H15 1H14 %* Premium revenue 706.9 649.7 8.8% - % of total Group 88.1% 88.3% (0.2%) Claims (including state levies, excluding risk equalisation) (517.8) (462.1) 12.1% Risk equalisation (94.7) (100.9) (6.1%) Gross underwriting result 94.4 86.7 8.9% - Gross margin (%) 13.4% 13.3%
Slide 11: arhi Gross Margin Analysis
arhi GROSS MARGIN ANALYSIS $(9.2)m 132.2 • Risk equalisation gross deficit has been favourably impacted by ageing ($12.4m), including the effect of Virgin Silver, offset by product mix with more customers on mid-level products, which on average have lower risk equalisation recoveries (-$6.5m). • The
Slide 12: ishi Key Metrics
ishi KEY METRICS ($m) 1H15 1H14 %* Total policyholders 35,653 15,408 131.4 - Net policyholder growth (%) 36.2% 69.0% (32.9)% Premium revenue 7.3 3.9 86.9% - % of total Group 0.9% 0.5% 0.4% Claims (4.4) (1.9) 128.2% Gross underwriting result 2.9 2.0 47.1% - Gross margin (%) 40.1% 51.0% (10.9)% Manage
Slide 13: iwhi Key Metrics
iwhi KEY METRICS ($m) 1H15 1H14 %* Total policyholders 19,719 19,215 2.6% - Net policyholder growth (%) 3.2% 6.3% (3.1)% Premium revenue1 15.1 14.3 5.4% - % of total Group 1.9% 2.0% (0.1%) Claims1 (4.4) (6.0) (27.2%) Gross underwriting result 10.8 8.4 28.9% - Gross margin (%) 71.2% 58.3% 12.9% Manag
Slide 14: New Zealand Key Metrics
NEW ZEALAND KEY METRICS ($m)* 1H15 1H14 %* Total policyholders 81,735 79,000 3.5% - Net policyholder growth (%) 3.3% (0.3)% 3.6% Premium revenue 72.9 67.5 8.1% - % of total Group 9.1% 9.2% (0.1)% Claims (48.3) (45.2) 6.9% Gross underwriting result (excluding PPB) 24.7 22.3 10.6% - Gross margin (%) 3
Slide 15: nib Options
nib OPTIONS ($m) 1H15 1H14* (%) Other income 0.6 0.2 151.7% Subscription income (0.1) 0.2 (144.5)% Fair value adjustment to contingent consideration 0.7 - NA Other expenses (3.1) (1.2) 162.9% Impairment of goodwill (1.4) - NA Other (1.7) (1.2) 44.0% Operating Profit (2.6) (1.0) 165.7% % of Group ope
Slide 16: Investments
INVESTMENTS Net investment return ($m) Net percentage return (%) 35.0 7.6% 30.0 7.6% Investment return ($m) 6.0% 5.6% 25.0 6.4% 5.7% 5.8% 20.0 15.0 10.0 5.0 $12.4m $25.6m $18.2m $28.8m $16.5m $29.7m $20.0m - 1H12 FY12 1H13 FY13 1H14 FY14 1H15 * 1H net investment returns are annualised figures • Net
Slide 17: NPAT Summary
NPAT SUMMARY * * * PPB – Premium Payback product 17
Slide 18: Cash Flow
CASH FLOW ($m) 1H15 1H14 % Net cash inflow/(outflow) from operating 16.6 26.3 (36.9%) Net cash inflow/(outflow) from investing (17.2) (31.5) (45.5%) Net cash inflow/(outflow) from financing (64.9) (22.5) 189.0% Net increase (decrease) in cash and cash equivalents (65.4) (27.6) 136.9% * Change is per
Slide 19: Available Capital Position
AVAILABLE CAPITAL POSITION 1H15 ($m) FY14 ($m) Opening available capital position above internal targets 18.7 14.8 Net profit after tax 41.1 69.8 Movement in foreign currency translation reserve direct to equity 0.8 2.0 Movement in other reserves direct to equity (1.2) 3.4 Changes in debt* 1.9 5.9 C
Slide 20: Mark Fitzgibbon, CEO and Managing Director
MARK FITZGIBBON CEO AND MANAGING DIRECTOR
Slide 21: Group Outlook
GROUP OUTLOOK • Steady market and earnings Non-arhi earnings ($m) Non-arhi earnings (% of operating profit) growth in core arhi business. 20.0 25.0% • Increasing earnings contribution 15.0 20.0% from existing non-arhi businesses. 15.0% ($m) (%) 10.0 10.0% • Further disciplined investment 5.0 in inno
Slide 22: arhi Outlook
arhi OUTLOOK Industry policyholder growth Industry policyholder growth (%) • Ongoing annual system policyholder growth circa 2%-3% with nib expected to grow in range 4%-5%. 300,000 6.0% Intense competition and churn the new “normal” with implications for net growth and required level 200,000 4.0% of
Slide 23: ishi Outlook
ishi OUTLOOK International students (ishi) International student visas granted (500 class) in Australia • Powerful organic growth supported by clear business and distribution 300,000 strategy. • Saudi student business increases 200,000 annual GWP x 2 and is expected to contribute towards future earn
Slide 24: iwhi Outlook
iwhi OUTLOOK International workers (iwhi) • 457 visa entries remain steady Number of 457 visas in Australia causing us to also focus upon other visa classes and distribution 100,000 possibilities. • Competition will see some insurance margin pressure 50,000 (yield), with strategies intended to more
Slide 25: New Zealand Outlook
NEW ZEALAND OUTLOOK • Focus will remain upon building business fundamentals: • nib brand awareness. • Improved operating model for Number of policyholders wealth advisor sales and distribution. Launch of DTC in October • Direct to Consumer (DTC) channel. 82,000 2013. Sales of DTC now account for mor
Slide 26: Other Business
OTHER BUSINESS nib Options • Thematic of medical travel remains compelling. • Losses to date reflect ($2.6 million in 1H15) building of business capability and key learnings. Other insurance lines • Further opportunities to increase life, travel and related insurance offerings. • International Priva
Slide 27: FY15 Guidance
FY15 GUIDANCE • FY15 consolidated operating profit of $75m-$82m, with result likely to be at the lower end of this range. • FY15 investment income forecast to be in line with relevant internal benchmarks*. • Ordinary dividend payout ratio 60%-70% of full year NPAT. * Excluding gain on sale from Paci
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Slide 29: nib Appendix
nib APPENDIX
Slide 30: nib Policyholder & Other Data
nib POLICYHOLDER & OTHER DATA nib Group 1H12 FY12 1H13 FY13 1H14 FY14 1H15 Total policyholders 457,768 471,455 564,286 578,659 598,164 611,225 628,488 − arhi 440,707 451,647 462,359 472,264 484,541 486,794 491,381 − iwhi 14,960 16,480 16,880 18,071 19,215 19,108 19,719 − ishi 2,101 3,328 4,680 9,115
Slide 31: Australian PHI Industry Data
AUSTRALIAN PHI INDUSTRY DATA 1H12 FY12 1H13 FY13 1H14 FY14 1H15 Total policyholders 5,815,019 5,936,660 6,012,420 6,118,351 6,191,994 6,286,535 - Policyholder growth 1.5% 3.7% 1.3% 3.1% 1.2% 2.7% Total persons covered 12,090,453 12,321,848 12,486,627 12,680,337 12,834,128 13,006,018 Average age of h
Slide 32: Detailed Income Statement
DETAILED INCOME STATEMENT ($m) 1H13 2H13 FY13 1H14 2H14 FY14 1H15 %* Premium revenue 612.8 677.6 1,290.4 735.4 756.2 1,491.6 802.3 9.1% - arhi 586.7 600.5 1,187.2 649.7 664.8 1,314.5 706.9 8.8% - iwhi2 13.8 13.8 27.6 14.3 14.4 28.7 15.1 5.4% - ishi 2.1 2.2 4.4 3.9 5.3 9.2 7.3 86.9% - nib New Zealand
Slide 33: Detailed Management Expenses
DETAILED MANAGEMENT EXPENSES Total MER (%) (amortisation) Commissions Commissions Management Employment Commisions Occupancy Marketing Marketing Marketing Marketing Expenses (deferred) (Direct) (Paid) Other Total IT ($m) arhi 1H13 22.6 11.2 6.5 (5.8) 1.1 4.0 3.3 6.5 49.5 8.4 2H13 23.6 8.8 8.6 (7.9)
Slide 34: arhi Claims
arhi CLAIMS Overall claims inflation (hospital and ancillary) 15.0% nib Industry* nib service cost nib utilisation nib annual drawing rate inflation (per SEU) incl. RE 10.0% 5.0% 0.0% Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 -5.0% * At the time of finalisin
Slide 35: arhi Claims
arhi CLAIMS Hospital claims inflation 25% nib Industry* nib service cost nib utilisation nib annual drawing rate inflation (per SEU) incl. RE 20% 15% 10% 5% 0% Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 -5% -10% Ancillary claims inflation 25% ni
Slide 36: Premium Payback (New Zealand)
PREMIUM PAYBACK (NEW ZEALAND) • Premium Payback (PPB) relates to previously offered products, where customers are entitled to receive a refund (or partial refund) of premiums paid less any claims made, once the policy has been in force for a specified period. • A PPB liability is recognised for thes
Slide 37: New Zealand Key Metrics (FX Analysis)
NEW ZEALAND KEY METRICS (FX ANALYSIS) Table below shows the variance to nib New Zealand due to exchange rates and underlying business performance. Variance due to FX Variance to underlying ($m)* 1H15 1H14 ($m) (%) ($m) (%) Premium revenue 72.9 67.5 2.5 3.7% 3.0 4.4% - % of total Group 9.1% 9.2% - -
Slide 38: Other Income, Expenses & Finance Costs
OTHER INCOME, EXPENSES & FINANCE COSTS ($m) 1H15 1H14 %* Complementary insurance Life and funeral insurance commission 1.0 0.9 15.3% Travel insurance and other commission 0.2 0.2 (3.1)% Total complementary insurance 1.2 1.1 11.9% Other income (excluding complementary insurance) nib Options income (r
Slide 39: Investment Asset Allocation
INVESTMENT ASSET ALLOCATION Consolidated Australian Investment Portfolio New Zealand Investment Portfolio Net return ($m) Net return ($m) Balance ($m) Allocation (%) Allocation (%) Allocation (%) 6 months to 6 months to at 31/12/14 at 31/12/14 at 31/12/14 at 31/12/14 31/12/14 31/12/14 Cash 114.5 21.
Slide 40: Balance Sheet
BALANCE SHEET Change ($m) 31 December 14 30 June 14 ($m) (%) Assets Cash and cash equivalents 83.3 148.7 (65.5) (44.0)% Receivables 44.5 44.9 (0.4) (0.9)% Financial assets at fair value through P&L 438.6 410.8 27.8 6.8% Deferred acquisition costs 46.1 40.0 6.0 15.1% Property, plant and equipment 49.
Slide 41: Available Capital
AVAILABLE CAPITAL • At 31 December the Group has $47.5m in available capital above internal targets (after allowing for the interim dividend payment), with the balance being available for business investment opportunities (noting capacity to also use debt) • Available capital determined taking into
Slide 42: Important Notice
IMPORTANT NOTICE The material in this presentation is a summary of the results of nib holdings limited (nib) for the 6 months ended 31 December 2014 and an update on nib’s activities and is current at the date of preparation, 23 February 2015. Further details are provided in nib’s half year accounts
Slide 43: nib 2015 Half Year Results
nib 2015 HALF YEAR RESULTS INVESTOR PRESENTATION MONDAY 23 FEBRUARY 2015