Nib Holdings Ltd · ASX:NHF
Nib — FY2012 Earnings Presentation
40 slides from Nib's earnings presentation, Aug 20, 2012
Slide 1: 2012 Full Year Results Investor Presentation
For personal use only 2012 FULL YEAR RESULTS INVESTOR PRESENTATION Monday 20 August 2012 1
Slide 2: Mark Fitzgibbon, CEO & Managing Director
For personal use only MARK FITZGIBBON CEO & MANAGING DIRECTOR 2
Slide 3: Group Highlights
GROUP HIGHLIGHTS For personal use only 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
Slide 4: Premium Revenue
PREMIUM REVENUE For personal use only 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 rev
Slide 5: Underlying Earnings Growth
UNDERLYING EARNINGS GROWTH For personal use only 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
Slide 6: Earnings Per Share
EARNINGS PER SHARE For personal use only 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 “no
Slide 7: Return on Equity
RETURN ON EQUITY For personal use only 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 fu
Slide 8: Dividend & Dividend Policy
DIVIDEND & DIVIDEND POLICY For personal use only 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 ($22.0m) Full year ordinary dividend of 9.25 cps reflects payout ratio of 60% of FY12 NPAT Dividend
Slide 9: Delivering Strong Shareholder Returns
DELIVERING STRONG SHAREHOLDER RETURNS For personal use only 300 Total shareholder return (nhf) S&P/ASX 200 Accumulation Index 250 147.1% 200 Index (base of 100) 150 100 (24.5%) 50 0 Nov-07 May-08 Nov-08 May-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Source: IRESS (as at 29 June 2012) J.P. Morgan Note: As
Slide 10: Michelle McPherson, CFO & Deputy CEO
For personal use only MICHELLE MCPHERSON CHIEF FINANCIAL OFFICER & DEPUTY CEO 10
Slide 11: HIB Key Metrics
HIB KEY METRICS FY11 FY12 % For personal use only Total policyholders 431,173 451,647 4.7 - Net policyholder growth (%) 6.0% 4.7% (1.3) Net new policyholders 24,244 20,474 (15.6) Total sales 61,031 62,046 1.7 - Sales growth (%) 15.0% 14.4% (0.6) - Sales new to category (%) 65.0% 67.1% 2.1 - Sales un
Slide 12: HIB Results
HIB RESULTS ($m) FY11 FY12 % For personal use only 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 Ma
Slide 13: HIB Underwriting Results (Impact of DAC)
HIB UNDERWRITING RESULTS (IMPACT OF DAC) For personal use only ($m) FY12 (Pre DAC) DAC FY12 (Post DAC) Gross underwriting result 159.9 - 159.9 Management expenses (103.5) 8.2 (95.3) - MER (%) 9.4% - 8.7% Net underwriting result 56.4 8.2 64.6 - Net Margin (%) 5.1% - 5.9% FY12 result includes impact o
Slide 14: IWB Results
IWB RESULTS ($m) FY11* FY12 % For personal use only 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 (%)
Slide 15: ISB Results
ISB RESULTS ($’000) FY11 FY12 % For personal use only 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.
Slide 16: Gross Profit Drivers (FY12 v FY11)
GROSS PROFIT DRIVERS (FY12 V FY11) 260.0 0.3 For personal use only 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 $9.5m increase in
Slide 17: NPAT Summary
NPAT SUMMARY 85.0 For personal use only 80.0 4.7 6.2 0.1 0.2 1.5 75.0 ($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 For personal use only ($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
Slide 19: Investments
INVESTMENTS For personal use only 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: $32.1m) impacted by lower
Slide 20: Surplus Capital Position
SURPLUS CAPITAL POSITION FY11 FY12 For personal use only Opening surplus capital position above 1.3x (Capital/Risk Multiple of ($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) C
Slide 21: Mark Fitzgibbon, CEO & Managing Director
For personal use only MARK FITZGIBBON CEO & MANAGING DIRECTOR 21
Slide 22: Market Conditions & Outlook
MARKET CONDITIONS & OUTLOOK For personal use only 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 Indus
Slide 23: Business Strategy
BUSINESS STRATEGY Ongoing organic growth with focus on <40 years of age and with additional For personal use only investment in: − Corporate market (in conjunction with IWB) − Western Australia − +55 segment International workers and students Leveraging brand for complementary sales Increase
Slide 24: Summary & Outlook
SUMMARY & OUTLOOK FY12 was strong with results achieved across key metrics For personal use only − Premium revenue up 11.5% − Underwriting margin up 15.0% to $70.7m (post DAC) − HIB net policyholder growth of 4.7%, beat industry growth of 3.7% − IWB contributed 10.6% of net underwriting profit − R
Slide 25: Q&A
For personal use only 25 Q&A
Slide 26: Appendix
For personal use only 26 APPENDIX
Slide 27: nib Policyholder & Other Data
NIB POLICYHOLDER & OTHER DATA nib FY08 FY09 FY10 FY11 FY12 Total policyholders 365,389 384,288 407,007 446,504 471,455 For personal use only - Total policyholders (HIB) 365,389 384,288 406,929 431,173 451,647 - Total policyholders (ISB) - - 78 1,432 3,328 - Total policyholders (IWB) - - - 13,899 16,
Slide 28: PHI Industry Policyholder Data
PHI INDUSTRY POLICYHOLDER DATA For personal use only FY08 FY09 FY10 FY11 FY12 Total policyholders 5,219,567 5,390,739 5,549,338 5,727,566 5,936,660 - Policyholder growth 4.2% 3.3% 2.9% 3.2% 3.7% Persons Covered 10,942,616 11,257,885 11,561,299 11,901,915 12,321,848 Average age of hospital persons (y
Slide 29: Financial Results (Excluding DAC)
FINANCIAL RESULTS (EXCLUDING DAC) Significant growth in broker distribution channels has resulted in deferring acquisition costs in FY12 and as a result increase reported underwriting result For personal use only Underlying results split out deferred acquisition costs (DAC) Performance indicator
Slide 30: Financial Results (Normalised Investment Income)
FINANCIAL RESULTS (NORMALISED INVESTMENT INCOME) Underlying results split out investment income between: Normalised investment income for FY12– calculated on the basis of a 4.0%* (FY11: 5.2%*) For personal use only assumed return over average investment assets for the period Investment experienc
Slide 31: Detailed Income Statement
DETAILED INCOME STATEMENT ($m) FY08 FY09 FY10 FY11 FY12 FY12 v FY11 (%) For personal use only 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
Slide 32: Detailed Management Expenses
DETAILED MANAGEMENT EXPENSES Total MER (%) Commissions Management Employment Commisions Occupancy For personal use only 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
Slide 33: Claims Expense
CLAIMS EXPENSE Overall claims inflation (hospital and ancillary) For personal use only 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,
Slide 34: Claims Expense
CLAIMS EXPENSE Hospital claims inflation nib Industry nib service cost nib utilisation nib annual drawing rate inflation (per SEU) incl. RE For personal use only 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-
Slide 35: Other Income & Expenses
OTHER INCOME & EXPENSES $m % ($m) FY11 FY12 For personal use only 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 dis
Slide 36: Investments
INVESTMENTS Surplus capital above internal prudential requirements held in 100% cash For personal use only Total Investment Portfolio Net return ($m) Allocation (%) 12 months to 30 June 2012 at 30 June 2012 Cash 11.6 36.0 All maturity debt 1.7 4.0 Short maturity debt 12.5 39.0 Receivable 0.9 4.0 T
Slide 37: Balance Sheet
BALANCE SHEET ($m) 30 June 2011 30 June 2012 ($m) (%) Current assets For personal use only 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-cu
Slide 38: Capital Adequacy
CAPITAL ADEQUACY For personal use only 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 For personal use only Health fund capital Group capital allocation (at 30 June 2012) (at 30 June 2012) $104.5 $125.9 $10.9
Slide 40: 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 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