Medibank Private Ltd. · ASX:MPL
Medibank Private — Investor Presentation (February 2020)
33 slides from Medibank Private's investor presentation, Feb 20, 2020
Slide 1: 2020 half year results
2020 half year results Investor presentation Craig Drummond – Chief Executive Officer | Mark Rogers – Chief Financial Officer 20 February 2020
Slide 2: Important notice
Important notice The information contained in this presentation is general information only. The information Such forward‐looking statements involve known and unknown risks, uncertainties and other contained in this presentation is not investment or financial product advice and has been factors. The
Slide 3: Highlights
Highlights Craig Drummond – Chief Executive Officer
Slide 4: Results summary
Results summary Customer focus has delivered stronger policyholder growth driven by a better customer experience Group operating profit1 Group NPAT1 Interim dividend Service NPS $218.8m $178.6m 5.70 cps Medibank 30.7 +7.1 -20.9% -9.0% unchanged ahm 40.7 +5.2 Health Insurance: • $2.9 billion in benef
Slide 5: Milestone scorecard update
Milestone scorecard update Good progress in 1H20 Objectives 1H20 update Customer NPS Average Service NPS PHIO complaints 1. Customer advocacy (gap to peers) 1H19 1H20 1H20: 24.3% share of market as at 30 Sept 19 Drive Service and Customer NPS for Medibank and ahm to Medibank 23.6 30.7 Modest gap per
Slide 6: Strategy and FY20 priorities
Strategy and FY20 priorities Medibank’s strategy remains unchanged – focus on growing PHI and transforming into a broader healthcare company Better Health for Better Lives Deliver differentiated Continue to improve Expand the offering Strategic products and services healthcare value for customers an
Slide 7: The path to stronger Medibank policyholder growth
The path to stronger Medibank policyholder growth Policyholder growth is expected to continue to strengthen as the Medibank brand returns to health Better Health for Better Lives FY17- FY18: Focus on the core offering & getting the basics right FY19-FY20: Differentiation, expanding the offer & provi
Slide 8: Making progress on alternative settings to deliver healthcare
Making progress on alternative settings to deliver healthcare Doctor led choice, convenience and lower cost for customers Addressing the • Managing growth in contacts • Commenced the pilot delivery of • Increasing importance of increasing need in our telehealth business, video consultations for sele
Slide 9: Financial results
Financial results Mark Rogers – Chief Financial Officer
Slide 10: Group financial summary
Group financial summary Six months ended 31 Dec ($m) 1H20 1H19 Change 1 Group revenue from external customers 3,421.5 3,330.8 2.7% Health Insurance operating profit 224.2 281.5 (20.4%) Medibank Health operating profit1 13.3 12.6 5.6% Segment operating profit 237.5 294.1 (19.2%) Corporate overheads (
Slide 11: Health Insurance result
Health Insurance result Operating performance impacted by increase in claims expense Six months ended 31 Dec ($m) 1H20 1H19 Change Premium revenue 3,315.5 3,240.3 2.3% Claims expense (2,851.6) (2,699.7) 5.6% Risk equalisation 8.4 15.2 (44.7%) Net claims expenses (including risk equalisation) (2,843.
Slide 12: Health Insurance – policyholders
Health Insurance – policyholders Encouraging resident policyholder growth of 1.1% in the last 12 months Six months ended 31 Dec 1H20 1H19 Change 1 Policyholders (thousand): Opening balance 1,796.0 1,780.9 0.8% Acquisitions 98.3 94.9 3.6% Lapses (86.6) (88.5) (2.1%) Change in market share4 1,807.7 1.
Slide 13: Health Insurance – claims
Health Insurance – claims Reported claims growth per policy unit of 5.2%, or 3.4% adjusted for provisions • Hospital claims up 6.0% reflecting: – Utilisation growth remains subdued at 1.1% – Prostheses claims growth of 6.4% – Continued benefit from hospital contracting and payment integrity initiati
Slide 14: Prostheses and Dental key drivers of claims growth
Prostheses and Dental key drivers of claims growth Underlying claims per PSEU movement (%) Health Insurance – claims % -4% -2% 0% 2% 6% 8% 0% 2% 3% 5% 6% 8% 4% 1% 4% 7% Jun-18 Jun-18 Jul-18 Jul-18 Aug-18 Aug-18 Sep-18 Sep-18 Oct-18 Oct-18 Nov-18 Nov-18 Dec-18 Dec-18 Jan-19 Jan-19 Feb-19 Feb-19 Mar-1
Slide 15: Health Insurance – claims
Health Insurance – claims Private hospital claims up 3% - reflecting subdued utilisation growth Net claims expense Indicative composition and movement in dollar value vs. 1H19 $ value (including risk equalisation) movement Dental +8% 8% Hospital Extras 6% Optical +4% 6% Physiotherapy +1% $682.9m 7%
Slide 16: Health Insurance – management expenses
Health Insurance – management expenses Continued discipline on costs resulted in a 9.6% decrease in management expenses • Management expenses down by 9.6% due to reductions in D&A and operating expenses • D&A charges down by $3.9m: – Includes contribution from extending useful life of key IT assets
Slide 17: Medibank Health
Medibank Health Result reflects period of transition and investment in the business for growth • Strong revenue growth of 18.1%, including underlying revenue • Operating margin down 130bps reflecting: growth of c.10% – Changing business mix impacting gross margin • Live Better rewards program: – Imp
Slide 18: Investment portfolio & investment income
Investment portfolio & investment income Investment income up $34.4m driven by higher growth and defensive portfolio returns • Growth portfolio investment income driven by stronger returns in equities, partially • Lower average RBA cash rate7 versus 1H19 reduced interest offset by weaker performance
Slide 19: Cash flow
Cash flow Continued positive net cash flow from operations • Movements in working capital Six months ended 31 Dec ($m) 1H20 1H19 Change associated with the Garrison contract Profit before net investment income and income tax 215.1 286.3 (71.2) exit Changes in working capital (45.7) (78.5) 32.8 • Inc
Slide 20: Capital
Capital Our capital position reflects strong capital generation and disciplined capital management • Health Insurance capital: ($m) 31 Dec 2019 30 Jun 20193 31 Dec 2018 – Remains at the top end of the 11% - 13% Total equity 1,837.0 1,935.4 1,838.8 target range Less: Intangible and illiquid assets (4
Slide 21: Dividend
Dividend Interim dividend of 5.70 cents per share in line with 1H19 • Interim ordinary dividend of 5.70 cents per share for the six month period ending 31 December 2019 (fully franked) • Payment date for interim dividend: 26 March 2020 (ex-dividend date 3 March 2020) • Interim dividend represents a
Slide 22: Navigating a lower premium environment
Navigating a lower premium environment Broad response across four levers Growth Customer Management Claims outside of growth expenses resident PHI • Policyholder growth: • Continue to leverage hospital • Maintain stable DAC and D&A • Continue to grow non-resident – Grow Medibank brand contracting ca
Slide 23: Conclusion
Conclusion Craig Drummond – Chief Executive Officer
Slide 24: Reform is working (slowly) – sector at a turning point?
Reform is working (slowly) – sector at a turning point? Hospital lives growth ‘000 Hospital lives growth by age cohort 150 100 55 50 27 68 67 62 60 41 - 4 (39) (38) (56) (77) -50 (24) (10) (12) (20) (7) -100 (31) (19) -150 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Under 30 30 - 49 50 - 69 Over 70 Total gro
Slide 25: Our industry must innovate and collaborate
Our industry must innovate and collaborate Industry Affordability Participation challenges Medibank Government Meeting the Driving change in the Opportunities for further reform: affordability challenge: health system: Affordability: Participation: • Driving preventative health • Strongly advocating
Slide 26: Outlook
Outlook Policyholder Utilisation Management Capital and portfolio growth and claims expenses management On the current trajectory, we We expect hospital and Management expenses Targeted inorganic growth for continue to expect Medibank ancillary utilisation to remain are expected to be Medibank Healt
Slide 27: Appendix
Appendix
Slide 28: Reconciliation of Group operating profit and underlying NPAT
Reconciliation of Group operating profit and underlying NPAT Group operating profit – total operations ($m) 1H20 1H19 Change Group operating profit – continuing operations 218.8 276.7 (20.9%) Operating profit – discontinued operations1 (1.0) 16.3 n.m. Group operating profit – total operations 217.8
Slide 29: Group financial summary – half by half
Group financial summary – half by half Change ($m) 1H20 2H19 1H19 1H20 vs. 1H19 1H20 vs. 2H19 1 Group revenue from external customers 3,421.5 3,325.0 3,330.8 2.7% 2.9% Health Insurance operating profit 224.2 261.0 281.5 (20.4%) (14.1%) Medibank Health operating profit1 13.3 9.5 12.6 5.6% 40.0% Segme
Slide 30: Health Insurance policyholders – half by half
Health Insurance policyholders – half by half Change 1H20 2H19 1H19 1H20 vs.1H19 1H20 vs. 2H19 Premium revenue ($m) 3,315.5 3,224.4 3,240.3 2.3% 2.8% Policyholders1 (thousand): Opening balance 1,796.0 1,787.3 1,780.9 0.8% 0.5% Acquisitions 98.3 111.3 94.9 3.6% (11.7%) Lapses (86.6) (102.6) (88.5) (2
Slide 31: Balance sheet
Balance sheet ($m) 31 Dec 2019 30 June 2019 31 Dec 2018 Change vs. 31 Dec 2018 Cash and cash equivalents 432.2 656.5 409.3 5.6% Financial assets at fair value 2,013.9 2,130.7 1,992.0 1.1% Trade and other receivables 205.8 283.9 290.5 (29.2%) Deferred acquisition costs 35.1 35.2 34.7 1.2% Other 50.2
Slide 32: Investment portfolio
Investment portfolio As at 31 December 2019 Balance ($m) Portfolio composition Target asset allocation Australian equities 137.2 6.3% 5.0% International equities 156.0 7.2% 6.0% Property 150.2 6.9% 7.0% Infrastructure1 - 0.0% 2.0% Growth 443.4 20.4% 20.0% Fixed income2 1,203.9 55.2% 52.0% Cash3 531.
Slide 33: Glossary
Glossary Term Definition Term Definition Six months ended/ending 31 December of the relevant financial PHIO Private Health Insurance Ombudsman 1H year The primary person who is insured under a private health 2H Six months ended/ending 30 June of the relevant financial year insurance policy (other th
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