Nib Holdings Ltd · ASX:NHF
Nib — H1 2012 Earnings Presentation
36 slides from Nib's earnings presentation, Feb 20, 2012
Slide 1: 2012 Half Year Results Investor Presentation
2012 HALF YEAR RESULTS INVESTOR PRESENTATION Monday 20 February 2012 \_ nib holdings
Slide 2: Mark Fitzgibbon, CEO & Managing Director
MARK FITZGIBBON CEO & MANAGING DIRECTOR | nib holdings
Slide 3: Group Highlights
GROUP HIGHLIGHTS For personal use only 1H12 1H11 % Premium revenue $554.4m $495.0m 12.0 Total policyholders 457,768 430,582 6.3 Net underwriting profit $42.7m $40.9m 4.5 Net investment income $12.4m $18.6m (33.2) Net profit after tax $38.3m $39.0 (1.9) Earnings per share 8.2 cps 8.0 cps
Slide 4: Premium Revenue Growth
PREMIUM REVENUE GROWTH For personal use only 1H12 1H11 % HIB $540.9m $489.8m 10.4 IWB $12.3m $5.1m# 138.9 ISB $1.2m $0.05m NA Total $554.4m $495.0m 12.0 Total premium revenue up 12.0%, primarily due to policyholder growth ($29.6m), price increases ($35.0m) offset by product mix ($10.3m)
Slide 5: Other Observations
OTHER OBSERVATIONS For personal use only We are experiencing some margin pressures in HIB • 1H12: 7.4% v 1H11: 8.2% Margins g in IWB business are strong g as anticipated p • 1H12: 29.0% v 1H11: 14.7% Weaker investment performance reflects lower capital and yields HIB = Health Insurance Busines
Slide 6: Return on Equity Is Growing
RETURN ON EQUITY IS GROWING 20.0% 18.0% 18.0% For personal use only 16.5% 16.3% 14.8% 15.0% ROE (%) 10.0% 7.8% 6.6% 5.0% 2 9% 2.9% 0.0% FY08 1H09 FY09 1H10 FY10 1H11 FY11 1H12 1 Using average shareholders’ equity over rolling 12 month period Underlying earnings growth combined with capital managem
Slide 7: Dividend
DIVIDEND For personal use only FY08 FY09 FY10 FY11 FY12 cps Interim Final Total Interim Final Total Interim Final Total Interim Final Total Interim Ordinaryy 0.0 2.1 2.1 1.0 1.4 2.4 2.0 5.0 7.0 4.0 4.0 8.0 4.25 Special 0.0 0.0 0.0 2.0 3.0 5.0 0.0 0.0 0.0 0.0 5.0 5.0 0.0 Total 0.0 2.1 2.1 3.0 4.4 7.4
Slide 8: Michelle McPherson, Chief Financial Officer & Deputy CEO
MICHELLE MCPHERSON CHIEF FINANCIAL OFFICER & DEPUTY CEO | nib holdings
Slide 9: HIB Key Metrics
HIB KEY METRICS 1H12 1H11 % For personal use only Total policyholders 440,707 417,776 5.5 - Net policyholder growth (%) 2.2 2.7 (0.5) Net new policyholders 9,534 10,847 (12.1) Total sales 28,864 27,661 4.3 - Sales rate (%) 6.7 6.8 (0.1) - Sales new to category (%) 68.3 67.5 0.8 - Sales u
Slide 10: HIB Results
HIB RESULTS ($ ) ($m) 1H12 1H11 % For personal use only Premium revenue 540.9 489.8 10.4 - % of total GWP 97.6% 98.9% (1.3) Claims (excluding Risk Equalisation) (376.3) (348.4) 8.0 Risk Equalisation (76.7) (60.9) 25.8 Gross underwriting result 87.9 80.5 9.2 - Gross margin (%) 16.3% 16.4%
Slide 11: IWB Results
IWB RESULTS ($m) 1H12 1H11 % For personal use only 3 month result Premium revenue 12.3 5.1 138.9 - % off total t t l GWP 2 2% 2.2% 1 0% 1.0% 12 1.2 Claims (5.1) (2.5) 95.9 Gross underwriting result 7.2 2.6 182.1 - Gross margin (%) 58.9% 49.9% 9.0 Management expenses (3.7) (1.8) 103.0 - M
Slide 12: ISB Results
ISB RESULTS ($’000) 1H12 1H11 % For personal use only Premium revenue 1,194 52 NA - % of total GWP 0 2% 0.2% 0 01% 0.01% 02 0.2 Claims (1,056) (32) NA Gross underwriting result 138 20 590.0 - Gross margin (%) 11.6% 38.5% (26.9) Management expenses (806) (301) 167.8 - MER (%) 67.5% 578.8%
Slide 13: Gross Profit Drivers (1H12 v 1H11)
GROSS PROFIT DRIVERS (1H12 V 1H11) 130.0 For personal use only 0.2 120.0 21.8 $5.7m 110.0 18.2 33.4 100.0 $m) 27.1 8.0 0.1 03 0.3 ($ 48 4.8 15 1.5 4.6 95.3 1.5 90.0 9.2 12.3 83.1 80.0 70.0 60 0 60.0 Policyholder growth and changing product mix contributed $5.7m of a total $7.5m increase in HIB gro
Slide 14: NPAT Summary
NPAT SUMMARY 55 0 55.0 For personal use only 50 0 50.0 4.6 0.1 (8.0) 45 0 45.0 (0.5) ($m) 7.5 (1.9) 40 0 40.0 39.0 (6.2) 1.5 38.3 1.6 35 0 35.0 0.3 30 0 30.0 Some items in this presentation rounded up/down for presentation purposes HIB = Health Insurance Business, ISB = International Students Busine
Slide 15: Management Expenses
MANAGEMENT EXPENSES (1H12 – 1H11)) Commisions) Employment 1 H12 Total Occupancy 1H12 MER 1H11 MER 1H11 Total For personal use only Marketing Marketing Change (Direct) Other (%) (%) IT ($m) (C E HIB 22.3 8.3 4.0 3.8 3.1 6.6 48.1 40.1 8.0 8.9 8.2 IWB 1.9 0.2 - 0.6 0.1 0.9 3.7 1.8 1.9 29.9 35.2 ISB
Slide 16: Investments
INVESTMENTS Net investment return ($m) Net percentage return (%) For personal use only 50.0 15.9% 40.0 10.5% m) ment return ($m 30.0 9.0% 6.6% 20.0 5.7% 10.0 Investm -0.4% $(13.9) - $(1.8) $33.6 $44.4 $18.6 $32.1 $12.4 (10.0) -6.5% (20.0) 1H09 FY09 1H10 FY10 1H11 FY11 1H12 Half year net percentage r
Slide 17: Surplus Capital Position
SURPLUS CAPITAL POSITION For personal use only 1H12 1H11 Opening surplus capital position above 1.3x (Capital/Risk Multiple of 2.00x) ($m) ($m) 138.0 144.5 Board’s revision to capital adequacy target from 1.4x at 30 June 2010 to 1.3x at 31 December 2010 - 29.3 On-market share buy back - (2.0) Capita
Slide 18: Mark Fitzgibbon, CEO & Managing Director
MARK FITZGIBBON CEO & MANAGING DIRECTOR | nib holdings
Slide 19: Market Conditions & Outlook
MARKET CONDITIONS & OUTLOOK Cumulative nominal GDP, GDP annual industry and nib revenue growth (indexed to December 2004) For personal use only 2.40 Nominal GDP Industry Revenue nib Revenue 2.20 2.00 1.80 1.60 1.40 1.20 1.00 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Source: PHIAC and t
Slide 20: Key Issues
KEY ISSUES For personal use only HIB organic growth and return on investment Improved policyholder retention and service excellence (TLC) ( ) Claims inflation especially risk equalisation Pricing P i i and d regulatory l t risk i k Growing g IWB and ISB business Ongoing capital managemen
Slide 21: Guidance
GUIDANCE For personal use only Net HIB policyholder growth of 6% Consolidated pre-tax net underwriting profit of $65m - $70m, with the additional investment in organic growth likelyy to see the result at the lower end of this rangeg Investment return in line with • Regulatory g y capital p ((8
Slide 22: For personal use only
For personal use only
Slide 23: Appendix
APPENDIX \_ nib holdings
Slide 24: nib Policyholder & Other Data
nib POLICYHOLDER & OTHER DATA For personal use only nib 1H10 FY10 1H11 FY11 1H12 Total policyholders 375,130 407,007 430,582 446,504 457,768 - Total policyholders (HIB) 375 130 375,130 406 929 406,929 417 776 417,776 431 173 431,173 440 707 440,707 - Total policyholders (ISB) - 78 433 1,432 2,101 -
Slide 25: PHI Industry Policyholder Data
PHI INDUSTRY POLICYHOLDER DATA By financial year intervals For personal use only FY06 FY07 FY08 FY09 FY10 FY11 Total policyholders 4,806,754 5,008,329 5,219,567 5,390,739 5,549,338 5,727,566 - Policyholder P li h ld growth th 2 1% 2.1% 4 2% 4.2% 4 2% 4.2% 3 3% 3.3% 2 9% 2.9% 3 2% 3.2% Persons Covere
Slide 26: Financial Results (Underlying Results)
FINANCIAL RESULTS (UNDERLYING RESULTS) Underlying results split out investment income between: Normalised investment income for 1H12– calculated on the basis of a 4.3%* (1H11: 5.2%*) For personal use only assumed return over average investment assets for the period Investment experience – differ
Slide 27: Detailed Income Statement
DETAILED INCOME STATEMENT 1H12 v ($m) 1H10 2H10 FY10 1H11 2H11 FY11 1H12 1H11 (%) For personal use only Premium revenue 446.1 455.3 901.4 495.0 512.8 1,007.8 554.4 12.0 - Premium revenue (HIB) - - - 489.8 501.5 991.3 540.9 10.4 - Premium revenue (ISB) - - - 0.1 0.4 0.5 1.2 NA - Premium revenue ((IWB
Slide 28: Detailed Management Expenses
DETAILED MANAGEMENT EXPENSES Total Marketing Marketing Total MER For personal use only ($m) Employment IT Occupancy Other Management (Direct) (Commisions) (%) Expenses HIB 1H09 18.4 8.5 0.9 3.0 5.5 6.5 42.8 10.4 2H09 17.3 8.7 1.2 2.7 3.2 5.9 39.0 9.3 FY09 35.7 17.2 2.1 5.7 8.7 12.4 81.8 9.9 1H10 18.
Slide 29: Claims Expense
CLAIMS EXPENSE Hospital p claims inflation For personal use only nib Industry nib service cost nib utilisation nib annual drawing rate inf lation (per SEU) incl. RE 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% Ancillary claims inflation nib Industry nib service cost nib utilisation 25.0% 20.0% 15
Slide 30: Other Income & Expenses
OTHER INCOME & EXPENSES For personal use only $m % ($m) 1H12 1H11 Fav/(Unfav) Fav/(Unfav) Other income Life & funeral insurance commission 0.5 0.2 0.3 150.0 Travel and other commission 0.2 0.2 - - - Rental income 0.4 0.2 0.2 100.0 Other 0.2 0.4 (0.2) (50.0) Total other income 1.3 1.0 0.3 39.
Slide 31: Investments
INVESTMENTS For personal use only All surplus capital above internal prudential requirements (1.3x) is held in 100% cash Total Investment Portfolio Net return ($m) Allocation (%) six months to 31 December 2011 at 31 December 2011 Cash 6.3 40 All maturity y debt 0.9 4 Short maturity debt 7.2 34 Rec
Slide 32: Balance Sheet
BALANCE SHEET ($m) 30 June 2011 31 December 2011 ($m) (%) For personal use only Current assets Cash and cash equivalents 240.8 191.9 (48.9) (20.3) Financial assets at fair value through P&L 239 3 239.3 211 9 211.9 (27 4) (27.4) (11 5) (11.5) Other current assets 49.5 48.3 (1.1) (2.3) Total cur
Slide 33: Capital Adequacy
CAPITAL ADEQUACY For personal use only 2.5 2.00 2.03 2.0 1.88 1.86 1.72 1.64 1.61 1.50 1.51 1.52 1.44 1.46 1.5 1.35 1.37 Current internal target 1.3x 1.0 nib Board revised capital adequacy target from 1.4x (or a Capital/Risk Multiple of 2 2.35x) 35x) at 30 June 2010 to 1 1.3x 3x (or a Capital/Risk
Slide 34: Regulatory Capital Requirements
REGULATORY CAPITAL REQUIREMENTS $57.4m of surplus capital above internal target (1.3x) after allowing $ For personal use only for interim dividend Health fund capital p Group p capital p allocation (at 31 December 2011) (at 31 December 2011) $105.4 $57.4 $98.4 $19.8 $17 0 $17.0 $445.9 $222.5 Cap ad
Slide 35: 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 2011 and an update on nib’s activities and is current at the date of preparation, 20 February 2012. Further details are provided in the C
Slide 36: 2012 Half Year Results
2012 HALF YEAR RESULTS INVESTOR PRESENTATION Monday 20 February 2012 \_ nib holdings