Nib Holdings Ltd · ASX:NHF

Nib — J.P. Morgan Australasian Conference 2014

29 slides from Nib's conference presentation, Oct 3, 2014

  1. Slide 1: Presentation to J.P. Morgan Australasian Conference – October 2014

    nib holdings limited t 13 14 63 Head Office f 02 4925 1999 22 Honeysuckle Drive Newcastle NSW 2300 e [email protected] abn 51 125 633 856 w nib.com.au For personal use only 3 October 2014 The Manager Company Announcements Australia Securities Exchange Limited Level 4, Bridge Street SYDNEY NSW 2000 Pres

  2. Slide 2: Intro slide to be inserted

    For personal use only Intro slide to be inserted 1

  3. Slide 3: Overview

    OVERVIEW ¢ Healthcare in Australia (and New Zealand) ¢ The role and structure of Private Health Insurance (PHI) ¢ About nib ¢ Results to date ¢ Outlook and investment thesis “Australian and New Zealand healthcare expenditure is growing at a rate well beyond GDP. Private health insurance will play an

  4. Slide 4: Healthcare in Australia (and New Zealand)

    ~ HEALTHCARE IN AUSTRALIA ~ (AND NEW ZEALAND)

  5. Slide 5: Healthcare spending continues to rise

    Healthcare spending continues to rise Australian healthcare spending ($AUD) NZ healthcare spending ($NZ) 150.0 For personal use only 21.0 140.0 20.0 130.0 19.0 120.0 ($ billion) 18.0 ($ billion) 110.0 17.0 100.0 16.0 90.0 15.0 80.0 14.0 70.0 13.0 2001 2003 2004 2006 2007 2009 2010 2002 2005 2008 201

  6. Slide 6: We're spending upon health care

    We‟re spending upon Australian health care spending Private hospital spending is increasing ($AUD) For personal use only Public hospital Private hospital $8.0 Medical services Dental services Other health practitioners Community Public health Medications $6.0 ($b) Aids/appliances 3% $4.0 $2.0 16% 19

  7. Slide 7: Government still accounts for lion's share of spending… but is it sustainable?

    In Australia government still accounts for lion‟s share of spending… but is it sustainable? Components of Australian healthcare spending Australian Treasury projections For personal use only 8% Australian Government State Government 2009-10 2049-50 7% Health Insurance Individuals Other 6% 5% % of GD

  8. Slide 8: It is a similar circumstance in New Zealand (NZ)

    It is a similar circumstance in New Zealand (NZ) Components of NZ healthcare spending NZ Treasury projections For personal use only Government Other Government 12% Local Government ACC 2010 2030 2060 Private Health Insurance 10% Community 8% 1.4% % of GDP 6% 4.9% 4% 10.5% 2% 0% 8.4% 0.3% 2.0% Graph

  9. Slide 9: The role and structure of Private Health Insurance (PHI)

    - THE ROLE AND STRUCTURE OF - PRIVATE HEALTH INSURANCE (PHI) nib

  10. Slide 10: PHI covers

    PHI covers Australia New Zealand For personal use only Public Hospital (accommodation, theatre, etc), choice of specialist Private Hospital (accommodation, theatre, etc), choice of specialist Medical specialist (surgeon, anaesthetist ) in hospital Medical specialist (surgeon, anaesthetist ) outside

  11. Slide 11: PHI industry structure (Australia and NZ)

    PHI industry structure (Australia) Other 17% • At 30 June 2013 there were 34 private health insurers Medibank/ AHM For personal use only 29% operating in Australia • Top five PHI players represent 82.3% of the polices nib 8% nationally • For profit insurers make up around 70% of the industry HBF/HG

  12. Slide 12: PHI coverage – percentage of Australian and NZ population with health insurance

    PHI coverage – percentage of Australian and NZ population with health insurance Australian industry Australian PHI coverage (% of population) growth drivers For personal use only 85.0% Medibank commenced on 1 Jul 1975 as a program of universal,  Increasing wealth and non-contributory health insuran

  13. Slide 13: PHI in Australia is heavily regulated

    PHI in Australia is heavily regulated Product For personal use only • Minimum prescribed benefits • Community rated Price • Government premium increase approval • Government Rebate • Lifetime Health Cover (LHC) loading • Risk Equalisation Prudential • Minimum capital requirement Government surcharge

  14. Slide 14: For personal use only

    For personal use only 13

  15. Slide 15: About nib

    About nib  FY14 Group premium revenue of A$1.5b, operating profit of $A72.3m, net profit after tax of $A69.8m For personal use only  More than 780 employees in Australia and New Zealand  Australia‟s 4th largest private health insurer, New Zealand‟s 2nd largest private health insurer (only ASX lis

  16. Slide 16: nib's business strategy is clear and focussed

    nib‟s business strategy is clear and focussed For personal use only Grow our Australian residents health insurance business (arhi) organically at circa 10% annual premium growth 1 (4-5% policyholder growth) through building national brand presence and with an emphasis on <40 market (Virgin Green), >

  17. Slide 17: Australian Residents Health Insurance (arhi) and nib New Zealand

    Australian Residents Health Insurance (arhi)  Registered Australian private health insurer (established 1952) For personal use only  Provider of hospital, medical and ancillary health insurance to more than 950,000 Australians  Market share of approximately 8%  FY14 premium revenue of A$1.3b, op

  18. Slide 18: International Workers and International Students Health Insurance

    International Workers Health Insurance (iwhi)  Entered international workers space through acquisition of IMAN (specialist provider of health insurance to skilled migrant workers) in September 2010 for approximately A$26m For personal use only  Provider of health and medical insurance to skilled m

  19. Slide 19: nib Options and nib Global

    nib Options  Leverages nib‟s brand reputation and distribution to support and grow the market for cosmetic, dental and surgical treatment both overseas and in Australia For personal use only  Initial efforts focus upon cosmetic surgery  Value proposition centred around trustworthiness, safety and

  20. Slide 20: For personal use only

    = a © _— 72) 5 —_ YS) LiL! cc =a O SS Te MOS IS)

  21. Slide 21: FY14 results

    FY14 results • Operating profit of A$72.3m up 4.3% on FY13 with premium revenue up 15.6% to A$1.5b1 For personal use only • Net profit after tax up 3.9% to A$69.8m (FY13: A$67.2m) • FY14 EPS of 15.9c up 3.9% (FY13: 15.3c). Return on equity 20.8% (FY13: 21.6%) • Group operating profit hampered by wea

  22. Slide 22: Group premium revenue, operating profit, ROE and EPS

    Group premium revenue Group Operating Profit Group operating profit arhi contribution to Group operating profit $72.3m $70.0m $69.3m For personal use only $59.8m $42.5m $59.8m $64.6m $59.0m $57.0m $47.1m $0.9b $1.0b $1.1b $1.3b $1.5b FY10 FY11 FY12 FY13 FY14 FY10 FY11 FY12 FY13 FY14 Return on Equity

  23. Slide 23: Dividend and Capital Management; Total Shareholder Return

    For personal use only Dividend and Capital Management* Total Shareholder Return* Ordinary Dividend Special Dividend Capital Return 700 nib S&P/ASX 200 Accumulation Index 600 475.2% 500 16.07cps 400 9.0cps 300 5.0cps 200 10.0cps 11.0cps 8.8% 8.0cps 9.25cps 100 7.0cps 0 FY10 FY11 FY12 FY13 FY14 Nov-07

  24. Slide 24: FY15 guidance

    FY15 guidance For personal use only • FY15 consolidated operating profit in the range of $75 million to $82 million • FY15 investment income forecast to be line with relevant internal benchmarks* * Internal Investment benchmarks • Australian Regulatory capital (80/20 defensive/growth) - target for p

  25. Slide 25: Outlook and investment thesis

    - OUTLOOK AND | INVESTMENT THESIS

  26. Slide 26: Outlook and investment thesis

    1. Australian healthcare spending per capita has increased 6.7% CAGR past 10 years and expected to continue. Australians For personal use only currently spend about A$6,300 per person per annum 2. We expect PHI in Australia will play a necessary expanded role  PHI coverage will continue to grow at

  27. Slide 27: High quality, independent equity research

    High quality, independent equity research For personal use only J.P. Morgan Siddharth Parameswaran (Insurance) Goldman Sachs Ian Abbott (Health) Macquarie Securities Tim Lawson (Insurance) Deutsche Kieren Chidgey (Insurance) Citi Mark Tomlins (Insurance) Credit Suisse Andrew Adams (Insurance) CBA Ro

  28. Slide 28: For personal use only

    For personal use only

  29. Slide 29: Risk equalisation – how it works

    Risk equalisation – how it works For personal use only • The current Risk Equalisation Trust Fund (RETF), which has been in place since 1 April 2007, consists of two elements • Gross deficit (what we „get back‟ from the pool)  Consists of the Age Based Pool (ABP) and the High Cost Claims Pool (HCCP

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