NIB Holdings Ltd · ASX:NHF
NIB — H1 2013 Earnings Presentation
40 slides from NIB's earnings presentation, Feb 18, 2013
Slide 1: 2013 Half Year Results Investor Presentation
2013 HALF YEAR RESULTS Investor Presentation MONDAY 18 FEBRUARY 2013 2 ‘= © @ D S © ‘= O D — @ oe — © UL
Slide 2: Mark Fitzgibbon, CEO and Managing Director
MARK FITZGIBBON CEO and Managing Director 2 ‘= © @ D S © ‘= O D — @ oe — © UL 2 = 2013 Half Year Results Investor Presentation
Slide 3: Group Highlights
GROUP HIGHLIGHTS For personal use only 1H13 1H12 %* Premium revenue1 $612.8m $554.4m 10.5 Net underwriting profit $39.1m $42.7m (8.6) - Australian Resident Health Insurance (arhi) $33.4m $39.8m (16.1) - International Workers Health Insurance (iwhi) $3.8m $3.6m 5.5 - International Students Health Ins
Slide 4: Consolidated Overview
CONSOLIDATED OVERVIEW For personal use only Positives • Strong premium growth across business up 10.5% to $612.8m (up 8.7% excluding nib nzed) • Ongoing alignment of policyholder sales with business strategy • MER down to 9.1% from 9.5% • nib nzed inaugural contribution of $2.0m (net underwriting pr
Slide 5: Average Premium Income (API)
AVERAGE PREMIUM INCOME* (API) arhi sales API by 1st half financial year For personal use only $2,000 $1,901 $1,800 $1,779 $1,600 $1,609 $1,499 $1,523 $1,400 $1,471 $1,200 $1,000 $800 $600 $400 $200 $0 1H08 1H09 1H10 1H11 1H12 1H13 • CAGR (1H10 – 1H13) of 7.7% highlights recent success * All figures
Slide 6: Premium Revenue Growth
PREMIUM REVENUE GROWTH For personal use only $612.8m $554.4m $495.0m $446.1m $410.6m $370.9m 1H08 1H09 1H10 1H11 1H12 1H13 6
Slide 7: Underlying Earnings Growth
UNDERLYING EARNINGS GROWTH For personal use only $40.9m $42.7m $39.1m $30.5m $20.8m $13.9m 1H08* 1H09 1H10 1H11 1H12 1H13 * Result was normalised to remove the impact of costs associated with nib’s demutualisation and listing, and “notional” tax 7
Slide 8: Earnings Per Share
EARNINGS PER SHARE For personal use only 8.7 cps 8.3 cps 8.0 cps 8.2 cps 3.4 cps 0.4 cps 1H08* 1H09 1H10 1H11 1H12 1H13 * Result was normalised to remove the impact of costs associated with nib’s demutualisation and listing, and “notional” tax. 8
Slide 9: Michelle McPherson, Chief Financial Officer and Deputy CEO
MICHELLE MCPHERSON Chief Financial Officer and Deputy CEO 2 ‘= © @ D S © ‘= O D — @ oe — © UL 9 2013 Half Year Results Investor Presentation
Slide 10: arhi Key Metrics
arhi KEY METRICS For personal use only 1H13 1H12 % Total policyholders 462,359 440,707 4.9 - Net policyholder growth (%) 2.4 2.2 0.2 Net new policyholders 10,712 9,534 12.4 Total sales 32,142 28,864 11.4 - Sales rate (%) 7.1 6.7 0.4 - Sales new to category (%) 64.1 68.3 (4.2) - Sales under 40 years
Slide 11: arhi Key Metrics
arhi KEY METRICS ($m) 1H13 1H12 %* For personal use only Premium revenue 586.7 540.9 45.8 8.5 - % of total GWP 95.7% 97.6% - (1.8) Claims (excluding risk equalisation) (420.0) (376.3) (43.6) (11.6) Risk equalisation (83.9) (76.7) (7.2) (9.5) Gross underwriting result 82.9 87.9 (5.0) (5.7) - Gross ma
Slide 12: iwhi Key Metrics
iwhi KEY METRICS ($m) 1H13 1H12 %* For personal use only Total policyholders 16,880 14,960 12.8 Premium revenue1 13.8 12.3 1.5 12.4 - % of total GWP 2.3% 2.2% - 0.1 Claims (6.6) (5.1) (1.5) (29.6) Gross underwriting result 7.3 7.2 0.0 0.5 - Gross margin (%) 52.6% 58.9% - (6.3) Management expenses (3
Slide 13: ishi Key Metrics
ishi KEY METRICS For personal use only ($’000) 1H13 1H12 %* Total policyholders 4,680 2,101 122.8 Premium revenue 2,146 1,194 952 79.7 - % of total GWP 0.4% 0.2% - 0.2 Claims (1,788) (1,056) (732) (69.3) Gross underwriting result 358 138 220 159.1 - Gross margin (%) 16.7% 11.6% - 5.1 Management expe
Slide 14: nib nzed Key Metrics
nib nzed KEY METRICS 1H13 – 1 month result For personal use only ($m) (acquisition completed in November 2012) Total policyholders 80,367 Premium revenue 10.1 - % of total GWP 1.6 Claims (5.8) Gross underwriting result 4.3 - Gross margin (%) 42.5% Management expenses (2.3) - MER (%) 23.0 Net underwr
Slide 15: Gross Profit Drivers
GROSS PROFIT DRIVERS 140.0 For personal use only 0.9 130.0 $5.2m 120.0 32.5 35.2 110.0 16.3 23.9 3.9 0.2 ($m) 100.0 9.6 11.4 3.5 0.7 2.8 0.4 0.2 0.2 4.3 94.8 90.0 95.3 $(7.8)m 80.0 70.0 60.0 • arhi claims and risk equalisation expenses not fully covered by rate increases due to lower than preferred
Slide 16: NPAT Summary
NPAT SUMMARY 45.0 For personal use only 0.2 40.0 3.4 ($m) 0.2 5.8 0.2 1.4 0.4 5.0 0.8 2.3 36.3 35.0 4.3 38.3 0.2 0.0 30.0 • 1H13 NPAT includes impact of: • 1 month nib nzed operating result following 30 November 2012 acquisition • 7.6% annualised net investment return on back of growth asset perform
Slide 17: Cash Flow
CASH FLOW ($m) 1H13 1H12 % For personal use only Net cash inflow/(outflow) from operating 5.0 34.9 (29.8) (85.6) Net cash inflow/(outflow) from investing (8.6) 38.8 (47.4) (122.2) Net cash inflow/(outflow) from financing 32.6 (118.7) 151.3 127.5 • Reduction in cash flow from operating activities mai
Slide 18: Available Capital Position
AVAILABLE CAPITAL POSITION 1H13 1H12 For personal use only Opening available capital position above internal targets ($m) ($m) 13.3 138.0 Investment in Tower Medical New Zealand (nib nzed) (18.7) 0.0 Capital Return 0.0 (75.4) Allowance for ordinary interim dividend (22.0) (19.8) Changes in forecast,
Slide 19: Mark Fitzgibbon, CEO and Managing Director
MARK FITZGIBBON CEO and Managing Director 2 ‘= © @ D S © ‘= O D — @ oe — © UL 19 2013 Half Year Results Investor Presentation
Slide 20: Outlook: Financial
OUTLOOK Financial For personal use only • Group net underwriting profit for FY13 of $75m - $78m including nib nzed • nib nzed net underwriting profit for FY13 of $5m - $7m • Group insurance premium revenue for FY13 of $1.2b - $1.3b • Investment income in line with relevant internal benchmarks: • Aus
Slide 21: Outlook: Business
OUTLOOK Business For personal use only • arhi net organic policyholder growth 4% - 5% for FY13 (consistent with target sustainable growth rate) • New arhi product range (to be launched March 2013) and online capability • Concerted effort to further improve arhi API (Virgin Silver) • Further automati
Slide 22: Outlook: Industry
OUTLOOK Industry For personal use only • PHI system will continue to grow at circa 3% - 3.5% with income testing of government rebate and proposed MYEFO* proposals (if made law) having only a moderate impact • Industry claims inflation of 5% - 6% • Federal election creates catalyst for positive refo
Slide 23: Outlook: A bit about nib nzed
OUTLOOK A bit about nib nzed For personal use only • Appointment of New Zealand resident Chairman and CEO well advanced • Separation and transition of business going smoothly including employees, key management personnel, IT systems and advisor/group employer relations • Have commenced extensive mar
Slide 24: For personal use only
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Slide 25: Appendix
APPENDIX 25 = 2013 Half Year Results Investor Presentation 2 ‘= © @ D S © ‘= O D — @ oe — © UL
Slide 26: nib Policyholder & Other Data
nib POLICYHOLDER & OTHER DATA nib 1H10 FY10 1H11 FY11 1H12 FY12 1H13 For personal use only Total policyholders 393,524 407,007 430,582 446,504 457,768 471,455 564,286 − arhi 393,524 406,929 417,776 431,173 440,707 451,647 462,359 − ishi - 78 433 1,432 2,101 3,328 4,680 − iwhi - - 12,373 13,899 14,96
Slide 27: PHI Industry Policyholder Data
PHI INDUSTRY POLICYHOLDER DATA By half year intervals For personal use only 1H09 1H10 1H11 1H12 1H13 Total policyholders 5,302,576 5,455,611 5,628,419 5,815,019 6,012,420 - Policyholder growth 1.6% 1.2% 1.4% 1.5% 1.3% Persons covered 11,117,461 11,404,872 11,733,719 12,090,453 12,486,627 Average age
Slide 28: Financial Results (Excluding DAC)
FINANCIAL RESULTS (EXCLUDING DAC) Significant growth in broker distribution channels resulted in deferring acquisition costs in 2H12 For personal use only and as a result increase reported underwriting result Underlying results split out deferred acquisition costs (DAC) Performance indicators –
Slide 29: Detailed Income Statement
DETAILED INCOME STATEMENT ($m) 1H11 2H11 FY11 1H12 2H12 FY12 1H13 %* For personal use only Premium revenue 495.0 512.8 1,007.8 554.4 569.4 1,123.8 612.8 10.5 - arhi 489.8 501.5 991.3 540.9 554.7 1,095.6 586.7 8.5 - ishi 0.1 0.4 0.5 1.2 1.8 3.0 2.1 79.7 - iwhi 5.1 10.9 16.0 12.3 12.9 25.2 13.8 12.4 -
Slide 30: Management Expenses
MANAGEMENT EXPENSES (1H13 – 1H12) For personal use only (Commisions) Employment 1 H13 Total Occupancy 1H13 MER 1H12 MER 1H12 Total Marketing Marketing Change (Direct) Other (%) (%) ($m) IT arhi 22.6 11.2 1.8 4.0 3.3 6.5 49.5 48.1 1.4 8.4 8.9 iwhi 1.5 0.6 0.1 0.6 0.1 0.6 3.5 3.7 (0.2) 25.4 29.9 ishi
Slide 31: Detailed Management Expenses
DETAILED MANAGEMENT EXPENSES For personal use only Total MER (%) Commissions Management Employment Commisions Occupancy Marketing Marketing Marketing Expenses (deffered) (Direct) (Paid) Other Total ($m) IT arhi 1H11 19.6 8.0 2.2 - 3.1 0.7 6.5 40.1 8.2 2H11 20.7 13.0 3.1 - 3.4 3.1 7.1 50.4 10.0 FY11
Slide 32: Claims Expense
CLAIMS EXPENSE For personal use only 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% -5.0% All figures exclude ishi, iwhi and nib nzed, unless otherwise stated 32 arhi = Austral
Slide 33: Claims Expense
CLAIMS EXPENSE Hospital claims inflation For personal use only nib Industry nib service cost nib utilisation nib annual drawing rate inflation (per SEU) incl. RE 25% 20% 15% 10% 5% 0% Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Sep-01 Sep-02 Sep-03 Sep-04 Sep-
Slide 34: Other Income & Expenses
OTHER INCOME & EXPENSES For personal use only ($m) 1H13 1H12 %* Other income Life & funeral insurance commission 0.7 0.5 0.2 40.0 Travel and other commission 0.2 0.2 - 0.0 Rental income 0.4 0.4 - 0.0 Other 0.3 0.2 0.1 50.0 Total other income 1.6 1.3 0.3 23.1 Other expenses Share registry – ongoing 0
Slide 35: Investments
INVESTMENTS For personal use only Half year net percentage return (%) are annualised figures • Strong investment return on back of growth asset performance • Consolidated defensive/growth split of 83%/17%, including nib nzed (1H12: 82%/18%) • Actual net return for January 2013 was 0.63% • Total net
Slide 36: Investments
INVESTMENTS For personal use only Australian Investment Portfolio New Zealand Investment Portfolio Net return ($m) Allocation (%) Net return ($m) Allocation (%) 6 months to 31/12/12 at 31/12/12 1 month to 31/12/12 at 31/12/12 Cash 4.3 34 0.2 49 All maturity debt 0.7 4 - - Short maturity debt 5.4 41
Slide 37: Balance Sheet
BALANCE SHEET For personal use only ($m) 30 June 2012 31 December 2012 ($m) (%)* Current assets Cash and cash equivalents 86.7 113.4 26.7 30.8 Financial assets at fair value through P&L 356.8 385.4 28.6 8.0 Other current assets 72.3 61.8 (10.5) (14.5) Total current assets 515.8 560.6 44.8 8.7 Non-cu
Slide 38: Capital Adequacy
For personal use only 38 CAPITAL ADEQUACY
Slide 39: Regulatory Capital Requirements
REGULATORY CAPITAL REQUIREMENTS For personal use only • $6.7m of available capital across the group above internal targets after allowing for interim dividend and holding company funding requirements Australian fund capital allocation New Zealand fund capital allocation (at 31 December 2012) (at 31
Slide 40: 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 2012 and an update on nib’s activities and is current at the date of preparation, 18 February 2013. Further details are provided in the Co