Nib Holdings Ltd · ASX:NHF
Nib — FY2011 Earnings Presentation
40 slides from Nib's earnings presentation, Aug 22, 2011
Slide 1: Investor Presentation
INVESTOR PRESENTATION MONDAY 22 AUGUST 2011 Mark Fitzgibbon alt= xecutive Offi Michelle McPherson Chief Financial Officer & Deputy CEO 2 ‘= © @ D S © ‘= O D — @ oe — © UL | nib holdings
Slide 2: Agenda
For personal use only Agenda g 1. Results overview 2. Segmented results & key metrics 3. Balance sheet & capital management 4. Strategy & outlook
Slide 3: 1. Results overview
For personal use only 1. Results overview Mark Fitzgibbon Chief Executive Officer & Managing Director
Slide 4: Group highlights
Group highlights For personal use only FY10 FY11 Change Net policyholder growth Health Insurance Business (HIB) 5.9% 6.0% 0.1% Consolidated Premium Revenue $901.4m $1,007.8m 11.8% Net underwriting profit1 $47.1m $61.5m 30.7% Net Investment income $44.5m $32.1m (27.7)% NPAT $61.5m $65.5m 6.
Slide 5: Policyholder growth - HIB
Policyholder growth - HIB For personal use only nib Industry 12% holder growth ((%) 11.1% 10% FY07 – FY11 8% 8.8% nib CAGR= 7% Industry CAGR = 3.4% 6% 5.9% 6.0% Net policyh 5.2% 4% 4.2% 4.2% 3.3% 3.2% 2% 2.9% 0% FY07 FY08 FY09 FY10 FY11 NSW/ACT VIC QLD WA NT TAS SA TOTAL FY11 Net new policyholders 1
Slide 6: Track record of double digit underlying earnings growth
Track record of double digit underlying earnings growth For personal use only nib underwriting profit 70 60 $61.5m 31% 50 $47.1m 17% 40 m) 22% $40.2m ($m 30 $33.0m 39% 20 $23.7m 10 0 FY07* FY07 FY08* FY08 FY09 FY10 FY11 * Result was normalised to remove the impact of costs associated with nib’s demu
Slide 7: Dividend
Dividend For personal use only Final dividend of 9 cps fully franked ($42m) Ordinary Special Full year dividend of 13 cps (8 cps per share) 14.0 ordinary dividend, 5cps special 12.0 dividend), reflects payout ratio of 92.7% Diviidend (cents p 5.0 10.0 of FY11 NPAT 8.0 6.0 Ordinary full year di
Slide 8: nib delivering strong shareholder returns
nib delivering strong shareholder returns For personal use only 250.0 Total shareholder return for nib S&P/ASX 200 Accumulation Index 200.0 101.5% 00) 150 0 150.0 dex (base of 10 100.0 Ind (19.1%) (19.1)% 50.0 0.0 Nov-07 May-08 Nov-08 May-09 Dec-09 Jun-10 Dec-10 Jun-11 Source: Iress, J.P. Morgan. Sh
Slide 9: 2. Segmented results & key performance metrics
For personal use only 2. Segmented g results & key y performance metrics Michelle McPherson Chief Financial Officer & Deputy CEO
Slide 10: Policyholder metrics - Health Insurance Business (HIB)
Policyholder metrics – Health Insurance Business (HIB) For personal use only FY10 FY11 % Total policyholders 406,929 431,173 6.0 - net policyholder growth (%) 5.9 6.0 0.1 Net new policyholders 22,641 24,244 7.0 Total sales 56,762 , 61,031 , 7.5 - Sales rate (%) 14.8 15.0 0.2 - Sales new to
Slide 11: Key metrics - HIB
Key metrics - HIB $m % For personal use only ($m) FY10 FY11 Fav/(Unfav) Fav/(Unfav) Premium revenue 901.4 991.3 89.9 10.0 - % of total Gross Written Premium (GWP) 100% 98.3% na (1.7) Claims (excluding Risk Equalisation) (658.0) (708.2) (50.2) (7.6) Risk Equalisation (109 9) (109.9) (132 7) (13
Slide 12: Key metrics - International Workers Business (IWB)
Key metrics- International Workers Business (IWB) ($m) 9 mths to 30 June 2011 For personal use only Premium revenue 16.0 - % of total GWP 1.6 Claims (7.6) Gross underwriting result 8.4 - Gross margin (%) 52.3 Management expenses (5 6) (5.6) - MER (%) 35.0 Net underwriting profit 2.8 - Net margin (%)
Slide 13: Key metrics - International Students Business (ISB)
Key metrics – International Students Business (ISB) For personal use only ($,000) FY11 Premium revenue 550 - % of total GWP 0.0 Claims (241) Gross underwriting result 309 - Gross margin (%) 56 1 56.1 Management expenses (1,360) - MER (%) 247.4 Net underwriting profit/(loss) (1,051) - Net margin (%)
Slide 14: Gross profit drivers FY11 v FY10
Gross profit drivers FY11 v FY10 220 0 220.0 For personal use only 61.9 (0.9) (42.6) 200.0 $11.8m 180.0 47.1 (32.1) $m) ($ 160.0 (14.6) 8.4 0.3 159.1 (7.6) (0.8) 2.1 25.5 (2.9) 140.0 (18.2) 133.5 120.0 100.0 Policyholder growth and changing product mix contributed $11.8m of a total $16.9m increase
Slide 15: NPAT summary of movement FY11 v FY10
NPAT summary of movement FY11 v FY10 90.0 For personal use only 85.0 (4.2) 84 8.4 (1.4) 80.0 0.3 (5.6 ) 75 0 75.0 ($m) 70.0 16.9 (12.4) (1 6) (1.6) 4.5 (1.0) 65.0 65.5 61.5 60.0 55.0 50.0 15
Slide 16: Detailed management expenses
Detailed management expenses FY10 MER (%) FY11 MER (%) Y10 – FY11) For personal use only ommisions) mployement Occcupancy Y10 Total Y11 Total Marketing Marketing Change (Direct) Other IT ($m) C FY FY M M (Co Em (FY HIB 40.2 21.0 5.3 6.5 3.9 13.6 90.6 86.4 4.2 9.2 9.6 ISB 0.9 0.1 0.2 0.0 0.0 0.2 1.4
Slide 17: Other income and expenses
Other income and expenses For personal use only $m % ($m) FY10 FY11 Fav/(Unfav) Fav/(Unfav) Other income Life & funeral insurance commission 0.2 0.5 0.4 191.5 Travel and other commission 0.3 0.4 0.2 54.0 Rental income 0.1 0.4 0.3 261.3 Other 0.7 0.9 0.2 28.6 Unclaimed dividends from Unverifi
Slide 18: Investment return
Investment return For personal use only Net investment return ($m) Net percentage return (%) Greater stability in investment result relative to historic p performance due to 50.0 transition in 1H11 to new investment 10.5% portfolio 40.0 8.8% 6.6% stment return ($m) Consolidated defensive/growth
Slide 19: 3. Balance sheet & capital management
For personal use only 3. Balance sheet & capital p management Michelle McPherson Chief Financial Officer & Deputy CEO
Slide 20: Operating cash flows remain strong
Operating cash flows remain strong For personal use only 110 100 99.2 90 40.0% 88.3 80 33.2% 70 (55.4)% 70.9 66.3 60 ($m) 50.0% 50 40 44.2 30 20 10 0 FY07* FY08* FY09 FY10 FY11 Drop p in FY09 reflects: • Impact of investment performance • Timing of investment distributions • First income tax payment
Slide 21: Surplus capital position
Surplus capital position FY10 FY11 For personal use only Opening surplus capital position above 1.4x (Capital/Risk Multiple of 2.35x) ($m) ($m) 131.6 144.5 Board s revision to capital adequacy target from 1 Board’s 1.4x 4x at 30 June 2010 to 1 1.3x 3x at 31 December 2010 - 29.3 On-market share buy b
Slide 22: Ongoing capital management initiatives
Ongoing capital management initiatives For personal use only 20.0% ROE ROE Underlying (normalised for investment returns) 16.3% 16.5% 15.5% 15.0% 13.1% ROEE (%) 11.3% 11.2% 10 0% 10.0% 7.8% 6.6% 5.0% 0.0% FY08 FY09 FY10 FY11 Capital management initiatives to date have further enhanced ROE, these i
Slide 23: 4. Strategy & outlook
For personal use only 4. Strategy gy & outlook Mark Fitzgibbon Chief Executive Officer & Managing Director
Slide 24: Market outlook & issues
Market outlook & issues For personal use only System growth (predicted at 3% for FY12) Means testing of 30% private health insurance rebate Claims utilisation and cost inflation, including Risk E Equalisation li ti National Health and Hospital “Reform” Industry I d consolidation/globalisat
Slide 25: Business strategy
Business strategy Ongoing organic growth with focus on <40 years of age but For personal use only with additional investment in: • Corporate market (in conjunction with IWB) • Western Australia • Seniors segment International workers/students global cover Further operational and IT efficiencie
Slide 26: FY12 business outlook & guidance
FY12 business outlook & guidance For personal use only Net HIB policyholder growth of 5% - 6% Consolidated net pre-tax underwriting profit of $65m - $70m Investment return in line with • Regulatory capital (80/20 defensive/growth) - target for portfolio UBS bank bill index plus 1% • Surplus ca
Slide 27: Summary
Summary For personal use only FY11 was very strong with record results achieved across key metrics • Policyholder revenue reached $1bn for the first time • Underwriting margin up 31% to $61.5m • HIB net policyholder growth of 6%, beat industry which grew by 3.2% • Integration g of IMAN,, with furt
Slide 28: nib holdings
| nib holdings AjUO SSN [euOSsJed JOS
Slide 29: Appendix
APPENDIX AjUO SSN [euOSsJed JOS
Slide 30: nib policyholder & other data
nib policyholder & other data For personal use only nib FY07 FY08 FY09 FY10 FY11 Total policyholders 328,784 365,389 384,288 407,007 446,504 - Total Policyholders (HIB) 328 784 328,784 365 389 365,389 384 288 384,288 406 929 406,929 431 173 431,173 - Total Policyholders (ISB) - - - 78 1,432 - Total
Slide 31: PHI industry policyholder data
PHI industry policyholder data For personal use only FY07 FY08 FY09 FY10 FY11 T l Policyholders Total P li h ld 5 008 329 5,008,329 5 219 567 5,219,567 5 390 739 5,390,739 5 549 338 5,549,338 5 727 566 5,727,566 - Policyholder growth 4.2% 4.2% 3.3% 2.9% 3.2% Persons Covered 10,561,848 , , 10,942,616
Slide 32: Detailed income statement
Detailed income statement Change ($m) FY07 FY08 FY09 FY10 FY11 ($m) % For personal use only Premium revenue 666.0 758.2 829.5 901.4 1,007.8 106.5 11.8 - Premium revenue (HIB) 666.0 758.2 829.5 901.4 991.3 89.9 10.0 - Premium revenue (ISB) - - - - 0.5 0.5 - - Premium Premi m revenue re en e (IWB) - -
Slide 33: Detailed management expenses
Detailed management expenses For personal use only Total Marketing Marketing Total MER ($m) Employment IT Occupancy Other Management (Direct) (Commisions) (%) Expenses HIB FY07 37.1 11.9 1.9 5.1 4.9 10.3 71.2 10.7 FY08 36.2 16.9 2.0 5.6 4.6 12.9 78.2 10.3 FY09 35.7 17.2 2.1 5.7 8.7 12.4 81.8 9.9 FY1
Slide 34: Claims inflation and utilisation
For personal use only H 0.0% -10.0% 10.0% 20.0% 30.0% -10.0% 10.0% 20.0% 30.0% 0.0% Se ep-01 Sep-01 Hospital Dec-01 Dec-01 Mar-02 M Mar-02 Ju un-02 Jun-02 l i nib Se ep-02 Sep-02 it l claims Dec-02 Dec-02 Mar-03 M Mar-03 Ju un-03 Jun-03 Se ep-03 Sep-03 Industry fl ti Dec-03 Dec-03 Mar-04 iinflation
Slide 35: Investments
Investments Capital Return of approximately $75m distributed to shareholders on 21 July 2011 sourced from cash For personal use only nib transitioned to MLC products as its investment asset consultant (fully effective October 2010) Below table provides investment return for 12 months to 30 Jun
Slide 36: Financial results - underlying results
Financial results – underlying results For personal use only Underlying results split out investment income between: Normalised investment income for FY11– calculated on the basis of a 5.2%* (FY10: 55.5% 5%*)) assumed return over average investment assets for the period Investment experience – d
Slide 37: Capital adequacy
Capital adequacy For personal use only 2.5 2 00 2.00 2.03 2.0 1.88 1.86 1.72 1.64 1.61 1.50 1.51 1.52 1 44 1.44 1 46 1.46 1.5 1.35 Current internal target 1.3x 10 1.0 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 nib Board revised capital adequacy targe
Slide 38: Regulatory capital requirements
Regulatory capital requirements $63m of surplus capital above internal target (1.3x) after allowing For personal use only for final dividend and Capital Return (distributed 21 July 2011) Health Fund capital Group capital allocation (at 30 June 2011) (at 30 June 2011) $15.6m $42.0m $63.0m $91.2m $75.
Slide 39: Disclaimer
Disclaimer 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 2011 and an update on nib’s activities and is current at the date of preparation, 22 August 2011. Further details are provided in the Company’s
Slide 40: For personal use only
INVESTOR PRESENTATION MONDAY 22 AUGUST 2011 Mark Fitzgibbon alt= xecutive Offi Michelle McPherson Chief Financial Officer & Deputy CEO 2 ‘= © @ D S © ‘= O D — @ oe — © UL | nib holdings