Nib Holdings Ltd · ASX:NHF
Nib — H1 FY2018 Earnings Presentation
30 slides from Nib's earnings presentation, Feb 19, 2018
Slide 1: FY18 Half Year Results Investor Presentation
FY18 HALF YEAR RESULTS INVESTOR PRESENTATION 19 FEBRUARY 2018
Slide 2: Disclaimer
DISCLAIMER The material in this presentation is a summary of the results of nib holdings limited (nib) for the six months ended 31 December 2017 and an update on nib’s activities and is current at the date of preparation, 19 February 2018. Further details are provided in nib’s half year accounts and
Slide 3: Mark Fitzgibbon, Chief Executive Officer & Managing Director
MARK FITZGIBBON CHIEF EXECUTIVE OFFICER & MANAGING DIRECTOR
Slide 4: Our Mission
OUR MISSION We exist to help people access and afford world class healthcare when and where needed. $0.8b 142,997 3,019,066 24,501 $15.8m 105 Paid in benefits1 Hospital Public hospital nib foundation grants nib foundation Ancillary services admissions admissions made since 2008 partnerships funded 5
Slide 5: 1H18 Financial Highlights
1H18 FINANCIAL HIGHLIGHTS Total Group Revenue UOP1 Net Investment Income NPAT $96.4m $1.1b 1.3% $17.1m $70.9m 8.9% Statutory Operating 23.9% ▼0.3% Profit2 $88.1m (▼3.1%) Statutory EPS2 Non-arhi Contribution to Interim Dividend Net Promoter Score3 Group UOP (fully franked) 15.9cps 31.2% 9.0cps
Slide 6: Key Business Strategies
KEY BUSINESS STRATEGIES Grow our core Australian Residents Health Insurance (arhi) business at a “sustainable” rate of 4-5% (net policyholder growth) with an emphasis upon segmentation and risk selection. • nib1 accounted for 35.6% of industry growth in 1H18 with multi-channel distribution a key fac
Slide 7: Key Business Strategies
KEY BUSINESS STRATEGIES Leverage capabilities and assets within the Group to pursue adjacent business opportunities. • Adjacent businesses grew their 1H18 earnings by 35.6% contributing over $30 million to Group UOP. • Significant growth in New Zealand earnings with UOP up ▲20.2% to $13.1million. Su
Slide 8: Key Business Strategies
KEY BUSINESS STRATEGIES Create competitive advantage across the Group through constant innovation, agility and cultural alignment. • Successful pilot launch of Going to Hospital tool to assist customers when going to hospital. • First Australian health insurer to launch customer service chatbot (nib
Slide 9: Consumer Empowerment
CONSUMER EMPOWERMENT Going to hospital tool ● Launched to nib customers today (19 February 2018). ● Helps answer questions when customers are being admitted to hospital: ● Am I covered? ● Who can I see? ● How much will it likely cost? ● Coming soon – service data such as PREMS. Sample, for illustrat
Slide 10: Michelle McPherson, Chief Financial Officer & Deputy CEO
MICHELLE McPHERSON CHIEF FINANCIAL OFFICER & DEPUTY CEO
Slide 11: Group Revenue
GROUP REVENUE Total revenue by segment Total Group revenue of $1.1b (▲8.9%) due to: ($m) 1,200.0 ● arhi revenue of $905.6m (▲9.1%), accounting for $1,083.4m 83.6% of total Group revenue. $995.0m ● iihi revenue of $46.2m (▲27.6%) due to international 1,000.0 student and workers policyholder growth ▲6
Slide 12: Group UOP
GROUP UOP Total Group UOP by segment ($m) Group UOP of $96.4m (▲1.3%) due to: 120.0 ● arhi of $66.3m reflects move to target 5% - 6% full year net margin range and ongoing investment in growth and other initiatives. 100.0 $95.2m $96.4m ● Adjacent businesses accounted for 31.2% of Group UOP (1H17: 23
Slide 13: Underlying Operating Profit to Net Profit After Tax
UNDERLYING OPERATING PROFIT TO NET PROFIT AFTER TAX ($m) 1H18 1H17 Change ● Acquisition of GU Health during 1H18 drove UOP 96.4 95.2 1.3% increase in M&A costs. Amortisation of acquired intangibles (3.4) (3.8) (10.5)% ● Increase in one-off transaction costs includes arhi - - - proposed JV in China,
Slide 14: Australian Residents Health Insurance
AUSTRALIAN RESIDENTS HEALTH INSURANCE Financial performance ($m) 1H181 1H17 Change ● Premium revenue boosted by policyholder growth, Premium revenue 905.2 829.8 9.1% 2017 premium increase and acquisition of GU Health Claims expense2 (752.5) (686.0) 9.7% (excluding GU Health revenue▲6.0%). Management
Slide 15: International (Inbound) Health Insurance
INTERNATIONAL (INBOUND) HEALTH INSURANCE Financial performance ($m) 1H181 1H17 Change ● Impressive iihi top line and earnings result accounting Premium revenue 45.7 35.9 27.3% for 16.1% of Group UOP (1H17: 14.0%). Claims expense (17.5) (12.8) 36.7% ● GU Health contributed $1.9m to premium revenue. M
Slide 16: New Zealand
NEW ZEALAND ● Strong earnings growth with UOP up ▲20.2% Financial performance ($m) 1H18 1H17 Change benefiting from positive underwriting performance with Premium revenue 97.5 100.0 (2.5)% claims ▼10.4%. Claims (medical & PPB1) (58.0) (64.7) (10.4)% ● In NZD premium revenue favourable NZ$1.3m versus
Slide 17: World Nomads Group
WORLD NOMADS GROUP Financial performance 1H18 1H17 Change ● Domestic and international sales have jumped ▲15.3% with our growth and expansion strategy Policyholder sales (#) 350,338 303,938 15.3% starting to deliver results. Gross written premium1 ($m) 70.7 62.1 13.9% ● Australian domestic sales ▲12
Slide 18: Investments, Gearing & Capital
INVESTMENTS, GEARING & CAPITAL 1H18 1H17 Change ● Investment portfolio generated strong returns. Net investment income ($m) 17.1 13.8 23.9% ● Increase in finance costs due to GU Health Net investment return (%) 2.1 2.0 10bps acquisition (additional $80.5m debt facility). Finance costs ($m) (2.7) (2.
Slide 19: Mark Fitzgibbon, Chief Executive Officer & Managing Director
MARK FITZGIBBON CHIEF EXECUTIVE OFFICER & MANAGING DIRECTOR
Slide 20: Outlook
OUTLOOK Thematic of growing healthcare spending (5% - 6% pa) with constrained public funding remain very powerful. Further public/private partnerships? Domestic Australian and New Zealand health insurance markets remain "soft" with strong competition creating sales, lapse and downgrading pressures.
Slide 21: Our Focus
OUR FOCUS Pursue arhi organic net growth with emphasis upon innovation, technology, cost control and expanding the value proposition. Give people more reason to have private health insurance, especially millennials. Target net profit margin 5%-6%. Further increase investment in adjacent businesses a
Slide 22: Guidance
GUIDANCE ($m) FY18 (Guidance) ● FY18 UOP expected to be at least $165 million Statutory operating profit $148.7 (statutory operating profit at least $148 million). One-off transactions and M&A costs 9.0 ● FY18 investment returns in line with internal One-off transactions1 5.7 benchmarks. M&A costs 3
Slide 23: Questions & Answers
QUESTIONS & ANSWERS
Slide 24: Appendix
APPENDIX
Slide 25: Policyholder & Other Data
POLICYHOLDER & OTHER DATA nib Group Health Insurance 1H18 1H17 Total persons covered 1,494,510 1,378,127 Total policyholders 816,676 751,629 - Australian Residents Health Insurance 584,416 540,403 - International (Inbound) Health Insurance 131,109 104,766 - nib New Zealand 101,151 106,460 arhi Net p
Slide 26: Detailed Income Statement
DETAILED INCOME STATEMENT (UNDERLYING UNDERWRITING RESULT) ($m) 1H18 1H17 Change Net premium revenue1 1,048.4 965.7 8.6% - arhi 905.2 829.8 9.1% - iihi 45.7 35.9 27.3% - nz 97.5 100.0 (2.5)% Net claims expense1 (712.7) (661.1) 7.8% - Hospital claims paid (arhi) (452.5) (424.9) 6.5% - Ancillary claim
Slide 27: Detailed Management Expenses
DETAILED MANAGEMENT EXPENSES (UNDERWRITING SEGMENTS) (Commissions (Commissions (Commissions Underwriting Amortisation Management Employment of Acquired Occupancy Intangibles Underlying amortised) Marketing Marketing Marketing Marketing Expenses Expenses Expenses deferred) Indirect Indirect Indirect
Slide 28: Premium Payback (PPB)
PREMIUM PAYBACK (PPB) Movement in central estimate of PPB liability ($m) 1H18 1H17 ● Premium Payback (PPB) relates to previously offered Opening balance – central estimate 21.4 25.6 products, where customers are entitled to receive a refund (or partial refund) of premiums paid less any claims made,
Slide 29: Other Income & Expenses
OTHER INCOME & EXPENSES1 ($m) 1H18 1H17 Change Other income Complementary insurance 1.3 1.2 8.3% Agency fee (excluding nib Options) 0.2 0.2 - Rental income 0.1 0.1 - Sundry income 0.0 0.0 - Digital Health Ventures income - 0.1 (100.0)% Total other income 1.6 1.6 - Other expenses Complementary insura
Slide 30: Investment Asset Allocation
INVESTMENT ASSET ALLOCATION Consolidated Australian Investment Portfolios New Zealand Investment Portfolio Balance ($m) Allocation Net return ($m) Allocation Net return ($m) Allocation at at 31/12/2017 at 31/12/2017 6 months to at 31/12/2017 6 months to 31/12/2017 31/12/2017 31/12/2017 Cash1 221.9 2