Nib Holdings Ltd · ASX:NHF
Nib — FY2015 Earnings Presentation
41 slides from Nib's earnings presentation, Aug 24, 2015
Slide 1: For personal use only
For personal use only Any discrepancies between totals and sums of components in this publication are due to rounding All figures quoted are Australian dollars unless otherwise stated
Slide 2: Mark Fitzgibbon, CEO and Managing Director
MARK FITZGIBBON CEO AND MANAGING DIRECTOR
Slide 3: Group Summary
GROUP SUMMARY For personal use only • Group operating profit up 13.0% to $81.7m (FY14: $72.3m). • Group premium revenue up 9.6% to $1.6b (FY14: $1.5b). • Australian Resident Health Insurance (arhi) operating profit up 26.0% to $71.8m – Net policyholders grew 4.7% (FY14: 3.1%) versus industry 2.5%. –
Slide 4: Performance Metrics: Premium Revenue and Operating Profit
PERFORMANCE METRICS For personal use only Group Premium Revenue ($b) Group Operating Profit ($m) 1.0 1.1 1.3 1.5 1.6 59.8 70.0 69.3 72.3 81.7 FY11 FY12 FY13 FY14 FY15 FY11 FY12 FY13 FY14 FY15 4
Slide 5: Performance Metrics: ROE and EPS
PERFORMANCE METRICS For personal use only Return on Equity (%) Earnings Per Share (cps) 16.5% 21.7% 21.6% 20.8% 23.1% 13.7 14.8 15.3 15.9 17.3 FY11 FY12 FY13 FY14 FY15 FY11 FY12 FY13 FY14 FY15 5
Slide 6: Performance Metrics: Dividends and Net Promoter Score
PERFORMANCE METRICS For personal use only Dividends (cps) Net Promoter Score* Ordinary Special Capital Return NPS (Australia) NPS (NZ) * 30.0% 25.0 20.0% 20.0 10.0% 16.07 0.0% 15.0 9.0 -10.0% 5.0 -20.0% 10.0 -30.0% 11.0 11.5 5.0 9.25 10.0 8.0 0.0 FY11 FY12 FY13 FY14 FY15 * nib New Zealand acquired i
Slide 7: Performance Metrics: Operating Cash Flow and Total Shareholder Return
PERFORMANCE METRICS For personal use only Net operating cash flow ($m) Total Shareholder Return (%) nib delivered a ~7.6% total shareholder return in FY15 versus ~5.7% for the All Ords Index. 500 nib All Ords Accumulation Index 400 277% 300 200 59% 100 53.2 44.2 66.2 88.3 134.6 20.0 93.7 114.2 0 FY0
Slide 8: Michelle McPherson, CFO and Deputy CEO
MICHELLE MCPHERSON CHIEF FINANCIAL OFFICER & DEPUTY CEO
Slide 9: NPAT Summary
NPAT SUMMARY For personal use only Increase in operating profit of $9.4m 120.0 110.0 4.0 4.4 100.0 28.4 12.5 90.0 3.8 0.7 ($m) 1.2 3.9 1.7 80.0 5.2 0.7 4.9 75.3 70.0 69.8 60.0 50.0 • Group operating profit up 13.0% to $81.7m has underpinned 7.9% increase in NPAT to $75.3m. • Tax expense impacted by
Slide 10: arhi Key Metrics
arhi KEY METRICS For personal use only FY15 FY14 Change* Total policyholders 509,897 486,794 4.7% - Net policyholder growth (%) 4.7 3.1 1.7% Net new policyholders 23,103 14,530 59.0% Total customers (persons covered) 1,001,368 959,974 4.3% Total sales 89,095 71,060 25.4% - Sales rate (%) 18.3 15.0 3
Slide 11: arhi Key Metrics
arhi KEY METRICS For personal use only ($m) FY15 FY14 Change* Premium revenue 1,429.5 1,314.5 8.8% - % of total Group 87.4% 88.1% (0.7)% Claims (including state levies, excluding risk equalisation) (1,053.4) (961.7) 9.5% Risk equalisation (185.5) (190.6) (2.7)% Claims including risk equalisation (1,
Slide 12: International (Inbound) Health Insurance Key Metrics
INTERNATIONAL (INBOUND) HEALTH INSURANCE KEY METRICS For personal use only ($m) FY15 FY14 Change* Total policyholders 71,783 45,284 58.5% - Net policyholder growth (%) 58.5% 66.6% (8.1)% Net premium revenue 54.9 38.0 44.6% - % of total GWP 3.4% 2.5% 0.9% Net claims expense (29.4) (16.9) 73.8% Gross
Slide 13: New Zealand Key Metrics
NEW ZEALAND KEY METRICS For personal use only (A$m) FY15 FY14 Change* Total policyholders 83,778 79,147 5.9% -Net policyholder growth (%) 5.9% (0.1)% 6.0% Premium revenue 150.4 139.2 8.1% - % of total Group 9.2% 9.3% (0.1)% Claims expense (96.8) (89.5) 8.1% Gross underwriting result (excluding PPB)
Slide 14: New Zealand Key Metrics
NEW ZEALAND KEY METRICS For personal use only 85,000 84,000 83,000 Number of inforce policies nib acquires 82,000 Tower Health 81,000 80,000 DTC Product launch 79,000 78,000 • nib New Zealand now growing strongly after a decade of losing policyholders, with policyholder growth of 5.9%. Direct-to-con
Slide 15: Other Income & Expenses
OTHER INCOME & EXPENSES For personal use only ($m) FY15 FY14 Change* Other income Complementary Insurance 2.4 2.2 13.1% nib options income 0.6 0.4 65.8% Agency fee (exc nib options) 0.3 0.2 26.9% Rental income 1.0 0.9 9.4% Sundry income 0.5 2.1 (76.5)% Digital Health Ventures licence fee income 0.3
Slide 16: Finance Costs & Gearing
FINANCE COSTS & GEARING For personal use only • Gearing ratio at 30 June 2015 of 15.6% (debt to debt plus equity). • Gearing of 32% (debt to debt plus equity) post WNG acquisition. • nib targets a long term average gearing ratio of 30%. In the event of a significant transaction gearing may be above
Slide 17: Investments
INVESTMENTS For personal use only 31.4 • Net investment return of 5.8% (FY14: 5.6%). • FY15 benefited ($5.4m) from sale of shareholding in Pacific Smiles Group (21 November 2014). Excluding the benefit from PSG sale our investment return would have been $26.0 million or 4.8%, reflecting lower cash r
Slide 18: Cash Flow
CASH FLOW For personal use only ($m) FY15 FY14 Change* Net cash inflow/(outflow) from operating 114.2 93.7 21.9% Net cash inflow/(outflow) from investing (48.9) (42.0) 16.3% Net cash inflow/(outflow) from financing 92.3% (89.0) (46.3) Net increase (decrease) in cash and cash equivalents (23.7) 5.4 (
Slide 19: Available Capital Position
AVAILABLE CAPITAL POSITION For personal use only ($m ) FY15 FY14 Opening available capital position above internal targets 18.7 14.8 Net profit after tax 75.3 69.8 (Increase)/Decrease in nib health funds capital (25.3) 49.0 (Increase)/Decrease in nib New Zealand capital (27.9) (11.8) Allow ance for
Slide 20: Mark Fitzgibbon, CEO and Managing Director
MARK FITZGIBBON CEO AND MANAGING DIRECTOR
Slide 21: arhi Outlook
arhi OUTLOOK For personal use only We expect the market to continue to grow and to increase our market share and earnings. Policyholder growth • System growth will continue for a number of reasons, nib Industry including inevitable funding shift from Government to private sector. 6.0% • Above system
Slide 22: arhi Outlook
arhi OUTLOOK For personal use only Managing underlying claims inflation a top priority • Underlying claims inflation to continue in Benefits paid per person* the order of 5%-8%. Growing determination evident nib Industry amongst health insurers to rein in over-servicing, avoidable hospital admission
Slide 23: International & Complementary Business Outlook
INTERNATIONAL & COMPLEMENTARY BUSINESS OUTLOOK "Complementary" business will continue to make a major contribution to pre-tax For personal use only operating earnings and further opportunities are very real. • International (Inbound) Health Insurance business (students and workers) to expand in FY16
Slide 24: Digital
DIGITAL For personal use only We will increase investment in our IT and digital strategy (including Whitecoat), especially recognising the potential of the "digital era" to disrupt the healthcare market and create opportunities. Whitecoat • Will help customers make more informed decisions around the
Slide 25: Travel Insurance (World Nomads Group)
TRAVEL INSURANCE (WORLD NOMADS GROUP) For personal use only • Third-largest distributor of travel insurance in Australia. • Specialises in the marketing, sale and distribution of travel insurance policies globally (Australia accounts for ~70% of GWP1). Business summary • Provides ancillary insurance
Slide 26: FY16 Guidance
FY16 GUIDANCE For personal use only • FY16 consolidated operating profit of $85m-$90m. • FY16 investment income forecast to be lower than FY15 but still in line with relevant internal benchmarks*. • Ordinary dividend payout ratio 60%-70% of full year NPAT. * Internal Investment benchmarks • Australi
Slide 27: For personal use only
For personal use only 27
Slide 28: For personal use only
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Slide 29: nib Policyholder & Other Data
nib POLICYHOLDER & OTHER DATA For personal use only nib Group FY11 FY12 FY13 FY14 FY15 Total policyholders 446,504 471,455 578,659 611,225 665,458 −Australian Residential Health Insurance 431,173 451,647 472,264 486,794 509,897 − International (inbound) Health Insurance 15,331 19,808 27,186 45,284 7
Slide 30: Australian PHI Industry Data
AUSTRALIAN PHI INDUSTRY DATA For personal use only FY11 FY12 FY13 FY14 FY15 Total policyholders 5,727,566 5,936,660 6,118,351 6,286,536 6,444,616 - Policyholder growth 3.2% 3.7% 3.1% 2.7% 2.5% Total persons covered 11,901,915 12,321,848 12,680,337 13,006,018 13,285,907 Average age of hospital person
Slide 31: Group Income Statement
GROUP INCOME STATEMENT For personal use only ($m) FY15 FY14 Change* Net premium revenue 1,634.9 1,491.6 9.6% Net claims expense (1,151.4) (1,040.0) 10.7% Risk equalisation levy (185.5) (190.6) (2.7)% State levies (28.2) (28.2) 0.3% (Increase)/Decrease in premium payback liability (1.9) 3.3 (157.8)%
Slide 32: Detailed Income Statement
DETAILED INCOME STATEMENT ($m) FY111 FY12 FY132 FY14 FY15 Change* For personal use only 3 Net premium revenue 1,007.8 1,123.8 1,290.4 1,491.6 1,634.9 9.6% - arhi 991.3 1,095.6 1,187.2 1,314.5 1,429.5 8.8% - iihi 16.5 28.2 32.0 38.0 54.9 44.6% - nibnz - - 71.1 139.2 150.4 8.1% Net claims expense3 (69
Slide 33: Detailed Management Expenses
DETAILED MANAGEMENT EXPENSES Commissions (Paid) For personal use only Marketing (Direct) (amortisation) Commissions Commissions Employment Management Occupancy Marketing Marketing Marketing (deferred) Expenses MER % Other Total IT ($m) Australian Residents Health Insurance FY11 40.3 21.0 5.3 - - 6.5
Slide 34: arhi Gross Margin Analysis
arhi GROSS MARGIN ANALYSIS For personal use only 350.0 300.0 91.5 250.0 ($m) 27.0 200.0 27.0 1.4 16.0 91.0 2.8 7.8 0.1 190.6 13.5 2.2 13.8 3.5 132.2 150.0 162.2 100.0 • Including the favourable risk equalisation ageing impact, claims inflation was more than covered by the 7.99% price increase effect
Slide 35: arhi Claims
arhi CLAIMS Hospital claims inflation (per person) For personal use only 14.0% nib nib service cost nib utilisation nib annual drawing rate inflation incl. RE Industry 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 -2.0
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 For personal use only partial refund) of premiums paid less any claims made, once the policy has been in force for a specified period. • A PPB liability
Slide 37: New Zealand Key Metrics (FX Analysis)
NEW ZEALAND KEY METRICS (FX ANALYSIS) • Graph below shows the variance to nib New Zealand due to exchange rates and underlying For personal use only business performance. • Net movement due exchange rates of $0.2m. Underlying Movements FX Movements 20.0 18.0 16.0 7.0 14.0 12.0 0.6 ($m) 10.0 4.2 4.6
Slide 38: Investment Asset Allocation
INVESTMENT ASSET ALLOCATION For personal use only Consolidated Australian Investment Portfolio New Zealand Investment Portfolio Balance ($m) at Allocation (%) at Net return ($m) 12 Allocation (%) at Net return ($m) 12 Allocation (%) at 30/06/15 30/06/15 months to 30/06/15 30/06/15 months to 30/06/15
Slide 39: Balance Sheet
BALANCE SHEET For personal use only ($m) 30 June 15 30 June 14 Change* Assets Cash and cash equivalents 123.7 148.7 (16.9)% Receivables 45.1 44.9 0.5% Financial assets at fair value through P&L 457.2 410.8 11.3% Deferred acquisition costs 64.1 40.0 60.2% 1 Property, plant and equipment 53.2 48.0 10.
Slide 40: Available Capital
AVAILABLE CAPITAL Available capital determined taking into consideration the following elements: For personal use only ($m ) 30 June 15 30 June 14 Net assets 344.3 356.4 nib health fund capital required (226.1) (200.8) nib nz capital required (58.5) (48.4) Capital required looking forw ard 12 months
Slide 41: Important Notice
IMPORTANT NOTICE For personal use only The material in this presentation is a summary of the results of nib holdings limited (nib) for the 12 months ended 30 June 2015 and an update on nib’s activities and is current at the date of preparation, 24 August 2015. Further details are provided in nib’s f