Nib Holdings Ltd · ASX:NHF
Nib — Investor Day (June 2012)
60 slides from Nib's investor day presentation, Jun 25, 2012
Slide 1: nib 2012 strategy briefing
nib 2012 strategy briefing Monday 25 June 2012
Slide 2: Agenda
Agenda Business Strategy update 9.00am Mark Fitzgibbon - CEO & Managing Director Organic growth 9.45am Rhod McKensey - Chief Marketing Officer James Barr - Group Manager Marketing and Products 10.30am Morning tea Claims experience 10.45am Rhod McKensey - Chief Marketing Officer Gavin Ward – Business
Slide 3: Business Strategy
Business Strategy Mark Fitzgibbon
Slide 4: Business strategy
Business strategy Organisational efficiency & performance Domestic HIB International growth business ENTERPRISE VALUE 4
Slide 5: Not business strategy
Not business strategy Health management organisation (HMO) Vertical integration Third party administration Aged care Life/general insurer 5
Slide 6: Domestic HIB growth
Domestic HIB growth Ongoing national campaign with skew toward under 40s (Virgin Green) Supported by: • Niche over 55s investment (Virgin Silver) • Renewed corporate effort • Increased retention effort • Investment in online and mobile M&A opportunistic 6
Slide 7: International business
International business International workers business (IWB) International students business (ISB) Other • Outbound Australian/ International Private Medical Insurance (IPMI)? • New Zealand? 7
Slide 8: Organisational efficiency & performance
Organisational efficiency & performance Claims inflation People & culture Information technology Innovation Capital management 8
Slide 9: Questions
Questions
Slide 10: Organic Growth
Organic Growth Rhod McKensey – Chief Marketing Officer James Barr – Group Manager Marketing and Products
Slide 11: Organic growth strategy
Organic growth strategy Grow organically through continuing to build our brand presence in the key markets of NSW/ACT, Queensland, Victoria and Western Australia Maintain focus on under 40s (Virgin Green) Accelerate our efforts in the niche over 55s segment Improve customer advocacy, retenti
Slide 12: Industry policyholder growth
Industry policyholder growth Industry net policyholder growth by state 70000 60000 Number of policyholders 50000 40000 WA 30000 VIC QLD 20000 NSW 10000 0 Source: PHIAC Industry growth continues to become more seasonal, driven by industry spend and Government Initiatives Despite uncertainty surro
Slide 13: nib policyholder growth
nib policyholder growth nib net policyholder growth by state 9,000 8,000 Number of policyholders 7,000 6,000 5,000 WA 4,000 VIC 3,000 QLD NSW 2,000 1,000 - -1,000 Source: nib With just under 8% market share, we continue to perform solidly accounting for 11% of total industry growth in the nine mon
Slide 14: Growth in target segment
Growth in target segment Growth in 20-39 hospital FY12 to 31 FY07 FY08 FY09 FY10 FY11 persons covered March 2012 nib 20,783 30,290 12,691 15,180 16,665 9,359 Industry 111,697 150,585 49,720 48,830 69,404 42,288 nib (%) 12.4 16.1 5.8 6.6 6.6 3.5 Industry (%) 5.4 6.9 2.2 2.1 2.9 1.7 % of growth attrib
Slide 15: Industry media spend
Industry media spend Estimated Industry Advertising (TV) Spend Other Iselect HBF Medibank/AHM Bupa/MBF HCF/MU nib 140 120 100 ($m) 80 60 40 20 0 FY07 FY08 FY09 FY10 FY11 FY12 F Source: Neilson AdQuest 2012 and nib analysis Since 2007 category spend has increased by almost $90m, mainly driven by an
Slide 16: Organic growth ROI
Organic growth ROI Acquisition cost per sale (rolling 12 months) Source: nib In established markets of NSW, Queensland and Victoria cost to acquire customers remains relatively stable The cost of acquisition has decreased and is stabilising in Western Australia as brand awareness levels increase
Slide 17: Customer retention a key area for business improvement
Customer retention a key area for business improvement FY12 to 31 Lapse (nib) FY07 FY08 FY09 FY10 FY11 May 2012 Lapse rate (%) 7.7 9.4 8.6 8.9 9.0 9.4* Total lapse 23,272 30,851 31,539 34,122 36,787 37,141 “Under 40s” segment (%) 62.8 62.2 62.4 62.4 62.9 63.3 Outside NSW/ACT (%) 23.9 31.0 32.9 34.9
Slide 18: Virgin Silver
Virgin Silver Industry: Hospital Persons Covered Growth 100,000 90,000 80,000 70,000 60,000 60 Plus 50,000 40-59 40,000 20-39 30,000 0-19 20,000 10,000 - Source: PHIAC Continued growth in the older age segment due to ageing of existing customer base Niche market opportunity due to lack of compet
Slide 19: Executing organic growth strategy
Executing organic growth strategy Marketing Leverage marketing investment to acquire as many new customers as possible – optimise the cost of acquisition Use sponsorships, particularly in new markets to increase brand awareness Use basic and consistent messages, targeting under 40s, emphasisin
Slide 20: Questions
Questions
Slide 21: Claims experience
Claims experience Rhod McKensey – Chief Marketing Officer Gavin Ward – Business Intelligence Manager
Slide 22: Total claims
Total claims FY11 (% of ($m) FY10 FY11 FY11 v FY10 (%) claims) Claims expense (636.0) (693.1) 81.7 9.0 - HIB hospital benefits paid (428.5) (461.6) 54.4 7.7 - HIB ancillary benefits paid (204.3) (222.2) 26.2 8.8 - OSC provision movement (HIB) (3.2) (1.5) 0.2 -53.1 - ISB claims expense - (0.2) 0.0 -
Slide 23: Hospital drawing rate inflation
Hospital Hospital drawing rate inflation 10.0% 8.0% 6.0% Industry 4.0% nib (post RE) nib (pre RE) 2.0% nib service cost 0.0% nib utilisation -2.0% -4.0% -6.0% -8.0% Sep-06 Dec-06 Sep-07 Dec-07 Sep-08 Dec-08 Sep-09 Dec-09 Sep-10 Dec-10 Sep-11 Dec-11 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Jun-06 Ju
Slide 24: Hospital
Hospital Service cost • Service cost inflation slowed through FY10 and FY11 as utilisation of day hospitals increased (which generally have lower service costs than overnight facilities) • More strategic approach to hospital contacting since leaving AHSA , including longer term agreements that all
Slide 25: Ancillary drawing rate inflation
Ancillary 25% Ancillary drawing rate inflation 20% 15% 10% Industry 5% nib nib service cost 0% nib utilisation -5% -10% Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Jun-06 Sep-06 Dec-06 Jun-07 Sep-07 Dec-07 Jun-08 Sep-08 Dec-08 Jun-09 Sep-09 Dec-09 Jun-10 Sep-10 Dec-10 Jun-11 Sep-11 Dec-11 Source: nib
Slide 26: Ancillary
Ancillary Service cost • Opportunities exist to develop targeted provider relationships to better manage service costs • Service cost will continue to increase slightly above standard service cost inflation as a higher proportion of our customer base are on products that pay benefits as a percenta
Slide 27: Risk equalisation
Risk equalisation The current Risk Equalisation Trust Fund (RETF) has been in place since 1 April 2007 Gross deficit (what we ‘get back’ from the pool) • Consists of the Age Based Pool (ABP) and the High Cost Claims Pool (HCCP). The ABP makes up around 97% of the RETF • The ABP is calculated bas
Slide 28: Risk equalisation
Risk equalisation The chart below shows the correlation between age and net risk equalisation contribution/receipt 55 nib Other funds 50 45 Average Age 40 nib 35 30 -$150 -$125 -$100 -$75 -$50 -$25 $0 $25 $50 $75 $100 $125 $150 Net Risk Equalisation per SEU Source: nib and PHIAC 28
Slide 29: Risk equalisation
Risk equalisation 8% 1,200 7% 1,000 6% Total industry pool (RHS) 800 Total Pool / Qtr ($m) 5% nib gross deficit (amount received) Total Pool as a % of total 4% 600 pool (LHS) 3% nib calculated Received % deficit 400 (amount paid) as a % of 2% total pool (LHS) Paid % 200 1% 0% 0 Mar-07 Mar-08 Mar-09
Slide 30: Claims management
Claims management Utilisation management (pre-service) • Product design • Provider profiling • Customer empowerment, e.g. Whitecoat and MediGap Substitute treatment • Hospital substitute • Hospital avoidance, e.g. COACH Recovery (post-service) Third party compensation Medical compensation
Slide 31: Questions
Questions
Slide 32: Continuous Improvement
Continuous Improvement Adam Novak Quality Improvement Manager
Slide 33: TLC: Think like the customer
TLC: Think like the customer TLC is about putting the customer at the heart of everything we do to improve customer experience ... and in turn improving business performance Increased Reduced Increased Increased Increased Increased customer management customer employee sales scalability retention ex
Slide 34: Understanding what our customers want
To improve the customer experience we must first understand what our customers want… Activities Voice of Customer and Demand Analysis Demand analysis 36% of calls through the Customer demand 36% of retail calls through service channel analysis 36% 64% represent service the retail failure demand 15.0
Slide 35: Three key areas for improvement
Based on our findings we are going to start with three key areas for improvement… Activities Rationale for selection Initial Target outcomes Lapse rate (first 6 months) Customer demand On‐boarding customer analysis 1 Call centre failure demand driven by confusion from the on‐boarding process and d
Slide 36: Questions
Questions
Slide 37: Information Technology
Information Technology Brendan Mills – Chief Information Officer
Slide 38: IT strategy
IT strategy Customer engagement, relationship management and service is world class Core business processes Management meet user information and requirements, are cost systems are secure, efficient and flexible to accessible, reliable and meet evolving business help us make better and customer needs
Slide 39: Technology delivering efficiencies
Technology delivering efficiencies Overall (Ancillary, Medical, Hospital) claiming rates 90% 80% 70% 60% Percentage 50% STP 40% Auto-Capture 30% Manual 20% 10% 0% Jul-10 Aug-10 Sep-10 Nov-10 Dec-10 Jan-11 Jun-11 Jul-11 Aug-11 Sep-11 Nov-11 Dec-11 Jan-12 Oct-10 Mar-11 May-11 Oct-11 Mar-12 May-12 Feb-
Slide 40: IT spend relative to the market
IT spend relative to the market IT spend as a percentage of revenue FY11 4% 3.5% 3.1% nib 2% Gartner (Insurance Global) Gartner (Global) 1.6% 0% IT investment currently lower than market comparisons (Gartner): • Represents a “cash out” basis • Significant growth year on year in capex spend • Looki
Slide 41: Key areas for action
Key areas for action Further automation of back office processes Mobile and web technology innovation Management Information Systems development Knowledge Management IMAN systems integration and beyond Security and compliance (PCI-DSS) Technology beyond a transactional world Improve
Slide 42: Key risks
Key risks Operating in a highly regulated market Skilled workforce (hiring, developing and retaining) Business Continuity (DR) Partner relationships Ensure alignment with TLC Security and threat management * TLC is nib’s quality improvement initiative which we have called Think Like the
Slide 43: Questions
Questions
Slide 44: International Business
International Business Matt Henderson
Slide 45: International workers business
International workers business Strategic Plan FY13-15 Escalate and expand IWB with additional emphasis on the corporate sector Develop international alliances and “global cover” prospect Target region Reason for purchase Source of influence Evaluation criteria Post Grad students University educa
Slide 46: International students business
International students business Strategic Plan FY13-15 Persevere with International students subject to improved commercial performance and/or success with the sponsored Middle East market Distribution channels by size of opportunity Sponsored international scholarships Offshore alliances Educatio
Slide 47: Market outlook
Market outlook Contribution of temporary immigrants to NOM Final and Preliminary Forecasts and Projections 200 Persons ('000) 150 Tourists 100 Working holiday makers Subclass 457 50 Students 0 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Source: DIAC The Ou
Slide 48: New Zealand
New Zealand NZ is a concentrated PHI market Largest fund (Southern Cross) have approximately 60% of market Top five funds have 90% of market Range of companies, including not-for-profits and for profit Employer schemes, broker driven market, but with opportunities for retail 1. In the Neth
Slide 49: Other International opportunities
Other International opportunities International Private Medical Insurance (IPMI) for global expats Alliances with international brokers and managing agents Medical tourism Indian/Australian opportunities 49
Slide 50: Questions
Questions
Slide 51: Finance & Outlook
Finance & Outlook Michelle McPherson
Slide 52: Group Highlights
Group Highlights Forecast FY12 consolidated pre-tax net underwriting profit (excluding approximately $1m restructure costs) will be at lower end of $65m - $70m guidance range Investment return for 11 months to 31 May 2012 at 6.4% annualised (FY12: 6.6%). FY12 actual net investment income impacte
Slide 53: 2H12 HIB operating environment challenging as expected
2H12 HIB operating environment challenging as expected Sales environment more competitive, but seeing signs of positive trend in average premium per new policy June sales result is key to determining full year net policyholder growth (14% of FY11 sales occurred during June 2011) FY12 has seen
Slide 54: Income testing of Federal Government Rebate
Income testing of Federal Government Rebate During June nib contacted all nib customers (with hospital or packaged products) regarding option to prepay and maintain rebate for up to 13 months Dedicated contact centre (outsourced) to manage pre-payment enquiries (receiving up to 2,000 calls per d
Slide 55: 2H12 HIB operating environment challenging as expected
2H12 HIB operating environment challenging as expected Level of PHI awareness appears to be up which has resulted in higher than previously forecast ancillary claims Management expenses forecast to be up $8m - $9m on 1H12 due to • Seasonality of marketing spend and as flagged in 1H12 results pre
Slide 56: Organisation restructure
Organisation restructure Organisation restructure undertaken in June 2012 Key principles of restructure focused on • Concentrate more resources and effort in customer facing areas • Reduce corporate overhead costs while minimising any impact on internal support services • Elevate the profile and
Slide 57: International performance
International performance International Workers Business • 2H12 result up on 1H12 as business continues to perform well International Students Business • Full year loss forecast at $1.4m up $0.3m on FY11 due claims experience (which we have addressed through changes to price and product design)
Slide 58: Potential change in accounting treatment
Potential change in accounting treatment would improve reported FY12 result Significant growth in broker distribution channels has resulted in an increase in upfront commission payments. The materiality of these payments is likely to see the need for nib to capitalise and amortise in line with AAS
Slide 59: Questions
Questions
Slide 60: nib 2012 strategy briefing
nib 2012 strategy briefing Monday 25 June 2012