Nib Holdings Ltd · ASX:NHF
Nib — FY2016 Earnings Presentation
31 slides from Nib's earnings presentation, Aug 22, 2016
Slide 1: Full Year Results 2016
FULL YEAR RESULTS 2016
Slide 2: Disclaimer
Disclaimer The material in this presentation is a summary of the results of nib holdings limited (nib) for the 12 months ended 30 June 2016 and an update on nib’s activities and is current at the date of preparation, 22 August 2016. Further details are provided in nib’s full year accounts and result
Slide 3: Full Year Results 2016 - CEO & Managing Director
Vlark oar CEO:& MANAGINGDIRECTOR
Slide 4: Snapshot
Snapshot Underlying business performance Group revenue1 grew by $233.8m (▲14.3%) to $1.9b with underlying operating profit2 (UOP) up by $44.0m (▲49.9%) to $132.0m3 (statutory operating profit of $120.8m ▲47.9%). All business segments grew and improved UOP. arhi with organic growth of 19,501 policies
Slide 5: Snapshot: Group profitability
Snapshot Group profitability • Net investment income of $16.9m was lower than FY15 ($31.4m). Previous year included one-off profit on sale FY16 total shareholder return of shares in PSG ($5.4m). (nib versus ASX200) • Net Profit After Tax of $91.8m (▲22.0%), EPS of (%) nhf ASX200 21.2cps (FY15: 17.3c
Slide 6: arhi gross margin improvement a key driver
arhi gross margin improvement a key driver • Claims inflation experience and trajectory favourable. • Lower hospital and ancillary utilisation growth the primary explanation. • nib experience accentuated by tactical product changes in FY15. Annual drawing rate inflation nib versus industry Gross mar
Slide 7: Strong operating cash flow correlating with UOP
Strong operating cash flow correlating with UOP ($m) Ope rating cash flow UOP 150 .0 100 .0 50.0 0.0 FY09 FY10 FY11 FY12¹ FY13¹ FY14 FY15 FY16 1FY12 & FY13 normalised for pre-payments of premiums in May/June 2012 associated with introduction of income testing of Government Rebate. FY12 normalised fo
Slide 8: Whitecoat
Whitecoat Tackling information asymmetries and improving market efficiency • Whitecoat enables consumers to search, find and book a healthcare provider as well as review their experience. Currently hosts more than 210,000 health care and ancillary providers and over 250,000 customer reviews. • Rapid
Slide 9: Full Year Results 2016 - Chief Financial Officer & Deputy CEO
CHIEF FINANCIAL OFFICER & DEPUTY CEO ©
Slide 10: FY16 Financial Summary
FY16 Financial Summary Outperformance across key performance areas FY16 FY15 Change Total Group revenue ($m) 1,873.11 1,639.3 14.3% UOP ($m) 132.0 88.0 49.9% Amortisation of acquired intangibles, one-off transactions (11.2) (6.4) 75.8% and M&A costs ($m) Statutory operating profit ($m) 120.8 81.7 47
Slide 11: Total Group Revenue
Total Group Revenue Continued strong revenue growth Total revenue by segment Total Group revenue of $1.9b1 (▲14.3%) due to: ($m) • arhi premium revenue of $1.6b (▲9.7%), accounting for 83.7% of total group revenue. 2,000.0 $1.9b • International (inbound) health insurance (iihi) $1.6b premium revenue
Slide 12: Group UOP
Group UOP Earnings improvement across key business segments UOP by segment Group UOP of $132.0m (▲49.9%) due to: ($m) • Significant improvement in arhi UOP up 31.4% 160.0 to $94.5m with improved claims experience a 140.0 $132.0m key driver. arhi continues to be core contributor 7% to Group UOP (71.6
Slide 13: Australian Residents Health Insurance (arhi)
Australian Residents Health Insurance (arhi) Strong improvement in gross margin FY16 FY15 Change • UOP result of $94.5m (▲31.4%) primarily due to: Policyholder growth (%) 3.8 4.7 (0.9)% • Gross margin improvement of 160bps to 14.9%. Lapse (%) 12.6 12.3 0.3% • Risk equalisation contribution favourabl
Slide 14: International (Inbound) Health Insurance (iihi)
International (Inbound) Health Insurance (iihi) Gross margin and volume drives positive earnings performance FY16 FY15 Change • Significant increase in revenue and earnings Policyholder growth (%) 28.0 58.5 (30.5)% underpinned by ongoing growth and improved Premium revenue ($m) 76.8 54.9 39.7% scale
Slide 15: nib New Zealand
nib New Zealand Delivering against performance targets FY16 FY15 Change • UOP up almost 100% due to continued Policyholder growth (%) 25.81 5.9 19.9% policyholder growth, success of PPB2 settlement Premium revenue ($m) 173.6 150.4 15.4% campaign, lower than forecast claims and Claims (medical and PP
Slide 16: World Nomads Group (WNG)
World Nomads Group (WNG) Operating results in line with expectations ($m) FY161 • GWP up 5.6% due to strong international Gross Written Premium2 112.2 sales (sales in USA up more than 30% Operating income 50.0 and UK more than 25% on FY15), offset Operating expenses (40.3) by weak Australian market
Slide 17: Investments, Gearing & Capital
Investments, Gearing & Capital Strong and efficient balance sheet ($m) FY16 FY15 Change • Group target capital and gearing remain in line Net investment income 16.9 31.4 (46.2)% with stated internal policies. Finance costs (5.2) (3.4) 53.1% • Continued focus on maintaining an efficient Available cap
Slide 18: Dividends
Dividends Dividend reflects ongoing earnings growth • FY16 final dividend increased to 9.0cps, fully (cps) franked (FY15: 6.0 cps) 30.0 Ordinary Special Capital Return • Ex-dividend date – 8 September 2016 25.0 • Record date – 9 September 2016 20.0 • Payment date – 7 October 2016 16.07 • Full year d
Slide 19: Full Year Results 2016 - CEO & Managing Director
Vlark oar CEO:& MANAGINGDIRECTOR
Slide 20: Regulatory reform
Regulatory reform Expect PHI reforms and potential regulatory changes to be a net positive • Market pricing for prostheses/medical devices. • Improved transparency to assist consumers choose/compare health insurance products. • Premium pricing deregulation. • Potential reform to risk equalisation. •
Slide 21: FY17 Outlook
FY17 Outlook Increased investment to support business expansion and earnings growth Soft market conditions likely to continue into FY17 however nib expected to deliver volume growth within 4% - 5% target range. Difficult to predict arhi claims inflation trajectory. Drawing rate inflation (per person
Slide 22: FY17 Guidance
FY17 Guidance • Consolidated UOP1 of $130m – $140m (Statutory operating profit of $122m – $132m). • Investment returns to be in line with relevant internal benchmarks2. 1 Refer slide 27 for breakdown of FY17 forecast one-off transaction/M&A costs and amortisation of acquired intangibles 2 Internal I
Slide 23: Questions & Answers
Questions & Answers FULL YEAR RESULTS 2016
Slide 24: Appendix
Aopendix y= bah ¥ ~ € “a me wad
Slide 25: nib Policyholder & Other Data (underwriting segments)
nib Policyholder & Other Data (underwriting segments) nib Group FY16 FY15 Total policyholders 726,710 665,458 − Australian Residents Health Insurance 529,398 509,897 − International (Inbound) Health Insurance 91,918 71,783 − nib New Zealand 105,394 83,778 nib New Zealand (Persons covered) 212,497 16
Slide 26: Detailed Income Statement (UOP)
Detailed Income Statement (UOP) ($m) FY16 FY15 Change Net premium revenue1 1,818.7 1,634.9 11.2% - arhi 1,568.4 1,429.5 9.7% - iihi 76.8 54.9 39.7% - nibnz 173.6 150.4 15.4% Net claims expense1 (1,288.0) (1,151.4) 11.9% - Hospital claims paid (arhi) (782.3) (695.9) 12.4% - Ancillary claims paid (arh
Slide 27: Underlying to statutory operating profit
Underlying to statutory operating profit ($m) FY17 Guidance FY16 FY15 Change UOP 130 – 140 132.0 88.0 49.9% - arhi - 94.5 71.9 31.4% - iihi - 17.2 12.2 41.2% - nibnz - 17.3 8.7 99.9% - WNG - 9.7 - NA - nib Options - (2.5) (3.0) 16.1% - Unallocated - (4.2) (1.7) 146.6% Amortisation of acquired intang
Slide 28: Detailed Management Expenses (Underwriting segments)
Detailed Management Expenses (Underwriting segments) Amortisation of (Commissions (Commissions (Commissions Underwriting Management Employment Occupancy Amortised) intangibles Underlying Marketing Marketing Marketing Marketing Expenses Expenses Expenses deferred) acquired Indirect Indirect Indirect
Slide 29: Premium Payback (PPB)
Premium Payback (PPB) Reduction in PPB liability having positive impact on UOP Movement in central estimate of PPB liability ($m) FY16 FY15 • Premium Payback (PPB) relates to previously offered products, where customers are entitled to receive a refund Opening Balance – central estimate 38.0 36.8 (o
Slide 30: Other Income & Expenses
Other Income & Expenses ($m) FY16 FY15 Change Other income Complementary insurance 2.3 2.4 (5.6)% nib Options income 0.0 (0.1) 145.7% Agency fee (exc nib Options) 0.3 0.3 0.3% Rental income 0.7 1.0 (21.5)% Digital Health Ventures income 0.2 0.5 (52.2)% Other 0.2 (0.3) 153.4% Total Other Income 3.81
Slide 31: Investment Asset Allocation
Investment Asset Allocation Consolidated Australian Investment Portfolio New Zealand Investment Portfolio Net return ($m) Net return ($m) Balance ($m) at Allocation (%) Allocation (%) at Allocation (%) 12 months to 12 months to 30/06/2016 at 30/06/2016 30/06/2016 at 30/06/2016 30/06/2016 30/06/2016