Nib Holdings Ltd · ASX:NHF
Nib — FY2012 Earnings Presentation
41 slides from Nib's earnings presentation, Aug 20, 2012
Slide 1: 2012 Full Year Results Investor Presentation
2012 FULL YEAR RESULTS INVESTOR PRESENTATION Monday 20 August 2012 1
Slide 2: Mark Fitzgibbon, CEO & Managing Director
MARK FITZGIBBON CEO & MANAGING DIRECTOR 2
Slide 3: Group Highlights
GROUP HIGHLIGHTS FY11 FY12 % Premium revenue $1,007.8m $1,123.8m 11.5 Net underwriting profit $61.5m $70.7m1 15.0 Net investment income $32.1m $25.6m (20.2) NPAT $65.5m $67.6m 3.2 EPS 13.7cps 14.8 cps 8.0 ROE 16.5% 21.7% 31.5 Full year dividend (Ordinary) 8.0 cps 9.25 cps 15.6 Full year dividend (Sp
Slide 4: Premium Revenue
PREMIUM REVENUE 11.5% 11.8% 8.7% 9.4% 13.9% Group premium revenue up 11.5% HIB premium revenue up 10.5% − Net policyholder growth of 4.7% (FY11: 6.0%) versus industry growth of 3.7% (FY11: 3.2%) − Average premium per new policyholder was up 12.8% to $1,858 − IWB premium revenue up 57.5% (FY11 wa
Slide 5: Underlying Earnings Growth
UNDERLYING EARNINGS GROWTH DAC 15% 31% 17% 22% $62.5m (without DAC) 39% Significant growth in broker distribution channels (22.2% of FY12 sales) has resulted in DAC in FY12 and as a result increased reported underwriting result DAC has increased underwriting result by $8.2m (FY12 net underwritin
Slide 6: Earnings Per Share
EARNINGS PER SHARE FY12 EPS up 8% to 14.8 cps Despite capital management initiatives, EPS pre DAC down slightly (13.5 cps), due to reduction in investment income * Result was normalised to remove the impact of costs associated with nib’s demutualisation and listing, and “notional” tax 6
Slide 7: Return on Equity
RETURN ON EQUITY 21.7% 16.3% 16.5% 7.8% 6.6% FY08 FY09 FY10 FY11 FY12 ROE of 21.7% actual* ROE further improved due to ongoing underlying earnings growth and capital management including: − $75.4 million Capital Return (distributed in July 2011) − Special dividends (FY11 full year special divide
Slide 8: Dividend & Dividend Policy
DIVIDEND & DIVIDEND POLICY 5.0 cps Special Ordinary 5.0 cps 9.25 cps 8.0 cps 7.0 cps 2.1 cps 2.4 cps FY08 FY09 FY10 FY11 FY12 Final ordinary dividend of 5 cps fully franked ($22.0m) Full year ordinary dividend of 9.25 cps reflects payout ratio of 60% of FY12 NPAT Dividend policy going forward
Slide 9: Delivering Strong Shareholder Returns
DELIVERING STRONG SHAREHOLDER RETURNS 300 Total shareholder return (nhf) S&P/ASX 200 Accumulation Index 250 147.1% 200 Index (base of 100) 150 100 (24.5%) 50 0 Nov-07 May-08 Nov-08 May-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Source: IRESS (as at 29 June 2012) J.P. Morgan Note: Assumes capital returns
Slide 10: Michelle McPherson, CFO & Deputy CEO
MICHELLE MCPHERSON CHIEF FINANCIAL OFFICER & DEPUTY CEO 10
Slide 11: HIB Key Metrics
HIB KEY METRICS FY11 FY12 % Total policyholders 431,173 451,647 4.7 - Net policyholder growth (%) 6.0% 4.7% (1.3) Net new policyholders 24,244 20,474 (15.6) Total sales 61,031 62,047 1.7 - Sales growth (%) 15.0% 14.4% (0.6) - Sales new to category (%) 65.0% 61.9% (3.1) - Sales under 40 years of age
Slide 12: HIB Results
HIB RESULTS ($m) FY11 FY12 % Premium revenue 991.3 1,095.6 10.5 - % of total GWP 98.3% 97.5% (0.8) Claims (excluding Risk Equalisation) (708.2) (775.7) 9.5 Risk Equalisation (132.7) (160.0) 20.5 Gross underwriting result 150.4 159.9 6.3 - Gross margin (%) 15.2% 14.6% (0.6) 1 Management expenses (90.
Slide 13: HIB Underwriting Results (Impact of DAC)
HIB UNDERWRITING RESULTS (IMPACT OF DAC) ($m) FY12 (Pre DAC) DAC FY12 (Post DAC) Gross underwriting result 159.9 - 159.9 Management expenses (103.5) 8.2 (95.3) - MER (%) 9.4% - 8.7% Net underwriting result 56.4 8.2 64.6 - Net Margin (%) 5.1% - 5.9% FY12 result includes impact of Deferred Acquisition
Slide 14: IWB Results
IWB RESULTS ($m) FY11* FY12 % Total policyholders 13,899 16,480 18.6 Premium revenue 16.0 25.2 57.5 - % of total GWP 1.6% 2.2% 0.6 Claims (7.6) (10.6) 39.5 Gross underwriting result 8.4 14.5 72.6 - Gross margin (%) 52.3% 57.5% 5.2 Management expenses (5.6) (7.1) 26.8 - MER (%) 35.0% 28.2% (6.8) Net
Slide 15: ISB Results
ISB RESULTS ($’000) FY11 FY12 % Total policyholders 1,432 3,328 132.4 Premium revenue 550 3,010 447.3 - % of total GWP 0.0% 0.3% 0.3 Claims (241) (2,875) 1,092.9 Gross underwriting result 309 135 (56.3) - Gross margin (%) 56.1% 4.5% (51.6) Management expenses (1,360) (1,486) 9.3 - MER (%) 247.4% 49.
Slide 16: Gross Profit Drivers (FY12 v FY11)
GROSS PROFIT DRIVERS (FY12 V FY11) 260.0 0.3 240.0 $9.3m 57.1 220.0 37.2 74.2 200.0 53.8 7.0 180.0 13.2 23.4 4.8 0.9 2.4 0.2 6.2 ($m) 174.6 160.0 27.9 140.0 159.1 120.0 100.0 80.0 60.0 Policyholder growth and changing product mix contributed $9.3m of a total $9.5m increase in HIB gross margin HIB
Slide 17: NPAT Summary
NPAT SUMMARY 85.0 80.0 4.7 6.2 0.1 0.2 1.5 75.0 ($m) 6.5 70.0 9.5 1.6 3.2 2.2 67.6 65.0 65.5 60.0 HIB = Health Insurance Business, ISB = International Students Business, IWB = International Workers Business 17
Slide 18: Management Expenses
MANAGEMENT EXPENSES (Commisions Paid) (FY12 – FY11) Employment (Commissions Occupancy FY12 Total FY11 Total Marketing Marketing Marketing Change deffered) (Direct) Other ($m) IT HIB 45.5 20.4 10.6 (8.2) 7.5 5.8 13.8 95.3 90.6 4.7 IWB 3.4 0.5 0.1 - 1.1 0.3 1.6 7.0 5.6* 1.4 ISB 0.6 0.1 0.6 - - - 0.2 1
Slide 19: Investments
INVESTMENTS Ongoing stability in investment result, with FY12 investment performance in line with targets for regulatory capital (UBS bank bill index + 1%) and surplus capital (UBS bank bill index) FY12 actual net investment income of $25.6m (FY11: $32.1m) impacted by lower capital base due to −
Slide 20: Surplus Capital Position
SURPLUS CAPITAL POSITION FY11 FY12 Opening surplus capital position above 1.3x (Capital/Risk Multiple of ($m) ($m) 2.00x) 144.5 138.0 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) (41.0) Capital Return - (75.4)
Slide 21: Mark Fitzgibbon, CEO & Managing Director
MARK FITZGIBBON CEO & MANAGING DIRECTOR 21
Slide 22: Market Conditions & Outlook
MARKET CONDITIONS & OUTLOOK System growth predicted at 3% in FY13 Income testing of Federal Government Rebate to have minimal impact Premium pricing regime improved Claims utilisation and cost inflation (including Risk Equalisation) to maintain 5%- 6% trajectory Industry consolidation/glob
Slide 23: Business Strategy
BUSINESS STRATEGY Ongoing organic growth with focus on <40 years of age and with additional investment in: − Corporate market (in conjunction with IWB) − Western Australia − +55 segment International workers and students Leveraging brand for complementary sales Increased investment in online
Slide 24: Summary & Outlook
SUMMARY & OUTLOOK FY12 was strong with results achieved across key metrics − Premium revenue up 11.5% − Underwriting margin up 15.0% to $70.7m (post DAC) − HIB net policyholder growth of 4.7%, beat industry growth of 3.7% − IWB contributed 10.6% of net underwriting profit − ROE of 21.7% (exceeded
Slide 25: Q&A
Q&A 25
Slide 26: Appendix
APPENDIX 26
Slide 27: nib Policyholder & Other Data
NIB POLICYHOLDER & OTHER DATA nib FY08 FY09 FY10 FY11 FY12 Total policyholders 365,389 384,288 407,007 446,504 471,455 - Total policyholders (HIB) 365,389 384,288 406,929 431,173 451,647 - Total policyholders (ISB) - - 78 1,432 3,328 - Total policyholders (IWB) - - - 13,899 16,480 # Employees (FTEs)
Slide 28: PHI Industry Policyholder Data
PHI INDUSTRY POLICYHOLDER DATA FY08 FY09 FY10 FY11 FY12 Total policyholders 5,219,567 5,390,739 5,549,338 5,727,566 5,936,660 - Policyholder growth 4.2% 3.3% 2.9% 3.2% 3.7% Persons Covered 10,942,616 11,257,885 11,561,299 11,901,915 12,321,848 Average age of hospital persons (yrs) 39.8 40.0 40.1 40.
Slide 29: Financial Results (Excluding DAC)
FINANCIAL RESULTS (EXCLUDING DAC) Significant growth in broker distribution channels has resulted in deferring acquisition costs in FY12 and as a result increase reported underwriting result Underlying results split out deferred acquisition costs (DAC) Performance indicators – Normalised earning
Slide 30: Financial Results (Normalised Investment Income)
FINANCIAL RESULTS (NORMALISED INVESTMENT INCOME) Underlying results split out investment income between: Normalised investment income for FY12– calculated on the basis of a 4.0%* (FY11: 5.2%*) assumed return over average investment assets for the period Investment experience – difference between
Slide 31: Detailed Income Statement
DETAILED INCOME STATEMENT ($m) FY08 FY09 FY10 FY11 FY12 FY12 v FY11 (%) Premium revenue 758.2 829.5 901.4 1,007.8 1,123.8 11.5 - Premium revenue (HIB) 758.2 829.5 901.4 991.3 1,095.6 10.5 - Premium revenue (ISB) - - - 0.5 3.0 447.8 - Premium revenue (IWB) - - - 16.0* 25.2 57.3 Claims expense (551.3)
Slide 32: Detailed Management Expenses
DETAILED MANAGEMENT EXPENSES Total MER (%) Commissions Management Employment Commisions Occupancy Marketing Marketing Marketing Expenses (deffered) (Direct) (Paid) Other Total IT ($m) HIB FY08 36.2 16.9 2.0 0.0 5.6 4.6 12.9 78.2 10.3 FY09 35.7 17.2 2.1 0.0 5.7 8.7 12.4 81.8 9.9 FY10 37.0 19.4 3.7 0.
Slide 33: Claims Expense
CLAIMS EXPENSE Overall claims inflation (hospital and ancillary) 15.0% nib inflation (pre Risk Equalisation) Industry inflation nib inflation (post Risk Equalisation) 10.0% 5.0% 0.0% -5.0% All figures excludes International Workers Business and International Students Business, unless otherwise state
Slide 34: Claims Expense: Hospital and Ancillary Inflation
CLAIMS EXPENSE Hospital claims inflation nib Industry nib service cost nib utilisation nib annual drawing rate inflation (per SEU) incl. RE 25% 20% 15% 10% 5% 0% Sep-01 Dec-01 Sep-02 Dec-02 Sep-03 Dec-03 Sep-04 Dec-04 Sep-05 Dec-05 Sep-06 Dec-06 Sep-07 Dec-07 Sep-08 Dec-08 Sep-09 Dec-09 Sep-10 Dec-1
Slide 35: Other Income & Expenses
OTHER INCOME & EXPENSES $m % ($m) FY11 FY12 Fav/(Unfav) Fav/(Unfav) Other income Life & funeral insurance commission 0.5 1.1 0.6 120.0 Travel and other commission 0.4 0.4 0.0 0.0 Rental income 0.4 0.8 0.4 100.0 nib Overseas and Unverified Policyholders 3.5 0.0 (3.5) - Trust distribution Other 0.8 1.
Slide 36: Investments
INVESTMENTS Surplus capital above internal prudential requirements held in 100% cash Total Investment Portfolio Net return ($m) Allocation (%) 12 months to 30 June 2012 at 30 June 2012 Cash 11.6 36.0 All maturity debt 1.7 4.0 Short maturity debt 12.5 39.0 Receivable 0.9 4.0 Total defensive 26.7 82
Slide 37: Balance Sheet
BALANCE SHEET ($m) 30 June 2011 30 June 2012 ($m) (%) Current assets Cash and cash equivalents 160.7 86.7 (74.0) (46.0) Financial assets at fair value through P&L 319.3 356.8 37.5 11.7 Other current assets 49.5 72.3 22.9 46.2 Total current assets 529.6 515.8 (13.8) (2.6) Non-current assets Available
Slide 38: Capital Adequacy
CAPITAL ADEQUACY Current internal target 1.3x (or a Capital/Risk Multiple of 2.00x) nib Board revised capital adequacy target from 1.4x (or a Capital/Risk Multiple of 2.35x) at 30 June 2010 to 1.3x (or a Capital/Risk Multiple of 2.00x) at 31 December 2010 38
Slide 39: Regulatory Capital Requirements
REGULATORY CAPITAL REQUIREMENTS $13.3m of surplus capital above internal target (1.3x capital adequacy coverage or 2.00x capital/risk multiple) after allowing for final dividend Health fund capital Group capital allocation (at 30 June 2012) (at 30 June 2012) $104.5 $125.9 $10.9 $315.2 Cap ad reserve
Slide 40: 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 2012 and an update on nib’s activities and is current at the date of preparation, 20 August 2012. Further details are provided in the Company’s full year accounts an
Slide 41: 2012 Full Year Results Investor Presentation
2012 FULL YEAR RESULTS INVESTOR PRESENTATION Monday 20 August 2012 41