Nib Holdings Ltd · ASX:NHF
Nib — FY2014 Earnings Presentation
39 slides from Nib's earnings presentation, Aug 25, 2014
Slide 1: 2014 Full Year Results Investor Presentation
2014 FULL YEAR RESULTS INVESTOR PRESENTATION MONDAY 25 AUGUST 2014 = = © @ Q = © ‘= S Q — @ oe = © UL
Slide 2: Mark Fitzgibbon, CEO and Managing Director
MARK FITZGIBBON CEO AND MANAGING DIRECTOR = = © @ Q = © ‘= S Q — @ oe = © UL
Slide 3: FY14 group summary
MAIN HEADING GOES HERE IN UPPERCASE PLEASE For personal use only FY14 group summary • Operating profit of $72.3m up 4.3% on FY13 with premium revenue up 15.6% to $1.5b1 • Net profit after tax up 3.9% to $69.8m (FY13: $67.2m) • FY14 EPS of 15.9c up 3.9% (FY13: 15.3c). Return on equity 20.8% (FY13: 21
Slide 4: Performance metrics: premium revenue and operating profit
MAIN HEADING GOES HERE IN UPPERCASE PLEASE For personal use only Performance metrics Group Premium Revenue Group Operating Profit Group operating profit arhi contribution to Group operating profit $72.3m $70.0m $69.3m $59.8m $42.5m $59.8m $64.6m $59.0m $57.0m $47.1m $0.9b $1.0b $1.1b $1.3b $1.5b FY1
Slide 5: Performance metrics: return on equity and EPS
MAIN HEADING GOES HERE IN UPPERCASE PLEASE For personal use only Performance metrics Return On Equity Earnings Per Share 16.3% 16.5% 21.7% 21.6% 20.8% 12.4cps 13.7cps 14.8cps 15.3cps 15.9cps FY10 FY11 FY12 FY13 FY14 FY10 FY11 FY12 FY13 FY14 Put a footer here if you need to. 5
Slide 6: Performance metrics: dividends and total shareholder return
MAIN HEADING GOES HERE IN UPPERCASE PLEASE For personal use only Performance metrics Dividends & Capital Management* Total Shareholder Return* Ordinary Dividend Special Dividend Capital Return 700 nib S&P/ASX 200 Accumulation Index 475.2% 600 500 16.07cps 9.0cps 400 5.0cps 300 200 10.0cps 11.0cps 8.
Slide 7: Michelle McPherson, CFO and Deputy CEO
MICHELLE MCPHERSON CHIEF FINANCIAL OFFICER AND DEPUTY CEO = = © @ Q = © ‘= S Q — @ oe = © UL
Slide 8: Group income statement
MAIN HEADING GOES HERE IN UPPERCASE PLEASE For personal use only Group income statement ($m) FY14 FY13# %* Group premium revenue1 1,491.6 1,290.4 15.6 Claims expense1 (1,040.0) (896.7) 16.0 Risk equalisation (190.6) (167.4) 13.8 State levies (28.2) (28.8) (2.3) Premium payback liability movement 3.3
Slide 9: Strong arhi growth although lapse is a brake
MAIN HEADING GOES HERE IN UPPERCASE PLEASE For personal use only Strong arhi growth although lapse is a brake FY14 FY13 %* Total policyholders 486,794 472,264 3.1 - Net policyholder growth 3.1% 4.6% (1.5) Net new policyholders 14,530 20,617 (29.5) Total sales 71,060 66,379 7.1 - Sales rate 15.0% 14.
Slide 10: arhi inflation behind gross margin weakness
MAIN HEADING GOES HERE IN claims UPPERCASE PLEASE For personal use only arhi inflation behind gross margin weakness ($m) FY14 FY13 %* Premium revenue 1,314.5 1,187.2 10.7 - % of total Group 88.1% 92.0% (3.9) Claims (excluding risk equalisation) (961.7) (862.6) 11.5 Risk equalisation (190.6) (167.4)
Slide 11: arhi gross margin analysis
MAIN HEADING GOES HERE IN gross UPPERCASE marginPLEASE For personal use only arhi analysis 260.0 $(7.8)m 240.0 66.2 $15.1m $(2.3)m 220.0 49.7 200.0 11.3 ($m) 180.0 55.2 31.6 3.0 10.8 2.7 2.3 2.8 160.0 14.8 1.6 2.0 162.2 157.2 140.0 120.0 100.0 • Expected favourable product mix effect due to marketin
Slide 12: ishi: distribution driving strong top line growth
MAIN HEADING GOES HERE INdistribution UPPERCASEdriving PLEASEstrong top line growth For personal use only ishi ($m) FY14 FY13 %* Total policyholders 26,176 9,115 187.2 Premium revenue 9.2 4.4 110.8 - % of total Group 0.6% 0.3% 0.3 Claims (5.1) (3.4) 48.9 Gross underwriting result 4.2 1.0 322.1 - Gro
Slide 13: iwhi: growing policyholders while maintaining margins
MAIN HEADING GOES HERE IN growing UPPERCASE PLEASE while maintaining margins For personal use only iwhi policyholders ($m) FY14 FY13 %* Total policyholders 19,108 18,071 5.7 Premium revenue1 28.7 27.6 4.0 - % of total Group 1.9% 2.2% (0.3) Claims1 (11.9) (11.8) 0.8 Gross underwriting result 16.9 15.
Slide 14: nib NZ transition and rebranding complete, ready to grow
MAIN HEADING GOES HERE nib NZ transition and rebranding complete, ready to grow IN UPPERCASE PLEASE For personal use only market and nib’s share ($m)1 FY14 FY132 – 7 month result Total policyholders 79,147 79,209 Premium revenue 139.2 71.1 - % of total Group 9.3% 5.5% Claims (89.5) (47.7) Decrease i
Slide 15: nib Options
MAIN HEADING GOES HERE INOptions UPPERCASE PLEASE For personal use only nib ($m) FY14 FY13* Other income 0.4 - Other expenses (2.9) - Operating profit (2.5) - * nib Options launched in March 2014, no operating expenditure in FY13 • nib Options operating expenditure of $2.9m to build and launch busin
Slide 16: Other income, expenses and finance costs
MAIN HEADING GOES HERE IN UPPERCASE PLEASE For personal use only Other income, expenses (excluding nib Options) & finance costs ($m) FY14 FY13 %* Complementary insurance Life and funeral insurance commission 1.8 1.5 17.0 Travel insurance and other commission 0.4 0.4 2.9 Total complementary insurance
Slide 17: Investment returns above internal benchmarks
MAIN HEADING GOES HERE IN UPPERCASE PLEASE For personal use only Investment returns above internal benchmarks • Above internal benchmark investment returns for the period, primarily due to equity asset class performance • Consolidated defensive/growth split of 83%/17%, including nib New Zealand (FY1
Slide 18: NPAT drivers
MAIN HEADING GOES HERE IN UPPERCASE PLEASE For personal use only NPAT drivers • nib New Zealand variances largely driven by a full 12 month result in FY14 compared to a 7 month result in FY13 26.3 100.0 95.0 0.0 8.2 1.6 90.0 85.0 ($m) 80.0 3.2 75.0 1.0 4.9 2.6 0.1 0.9 0.1 70.0 1.4 69.8 25.3 65.0 67.
Slide 19: Generating strong operating cashflows
MAIN HEADING GOES HERE IN UPPERCASE strongPLEASE For personal use only Generating operating cashflows ($m) FY14 FY13 % Net cash inflow/(outflow) from operating 93.7 20.0 367.6 Net cash inflow/(outflow) from investing (42.0) 24.0 (275.1) Net cash inflow/(outflow) from financing (46.3) 10.5 (541.5) Ne
Slide 20: Available capital position
MAIN HEADING GOES HERE IN UPPERCASE PLEASE For personal use only Available capital position FY14 ($m) FY13 ($m) Opening available capital position above internal targets 14.8 13.3 Net profit after tax 69.8 67.2 Movement in foreign currency transaction reserve direct to equity 2.0 1.2 Movement in oth
Slide 21: Mark Fitzgibbon, CEO and Managing Director
MARK FITZGIBBON CEO AND MANAGING DIRECTOR = = © @ Q = © ‘= S Q — @ oe = © UL
Slide 22: Outlook – arhi demand likely to be strong
MAIN HEADING GOES HERE IN UPPERCASE PLEASE For personal use only Outlook – arhi demand likely to be strong arhi nib and industry* annual net policyholder growth • Total demand for private health insurance expected to grow circa 3% (net annual nib Industry policyholder growth) - with nib continuing t
Slide 23: Value creation via diversification
MAIN HEADING GOES HERE IN UPPERCASE creation viaPLEASE For personal use only Value diversification International and adjacent business segments • iwhi and ishi markets forecast to grow with opportunities for nib to increase market share and profitability • nib New Zealand investment to be maintained
Slide 24: Capital management remains in focus
MAIN HEADING GOES HERE IN UPPERCASE PLEASE For personal use only Capital management remains in focus • Dividend payout ratio of 60%-70% full year NPAT • Capacity to better optimise nib’s capital structure with additional debt • M&A opportunities although not clear, have been provided for in capital
Slide 25: FY15 guidance
MAIN HEADING GOES HERE IN UPPERCASE guidance PLEASE For personal use only FY15 • FY15 consolidated operating profit in the range of $75 million to $82 million • FY15 investment income forecast to be line with relevant internal benchmarks* * Internal Investment benchmarks • Australian Regulatory capi
Slide 26: For personal use only
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Slide 27: For personal use only
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Slide 28: nib other data: policyholders
MAIN HEADING GOES HERE INpolicyholder UPPERCASE&PLEASE For personal use only nib other data nib FY10 FY11 FY12 FY13 FY14 Total policyholders 407,007 446,504 471,455 578,659 611,225 − arhi 406,929 431,173 451,647 472,264 486,794 − ishi 78 1,432 3,328 9,115 26,176 − iwhi - 13,899 16,480 18,071 19,108
Slide 29: Australian PHI industry data
MAIN HEADING GOES HERE IN UPPERCASE PLEASEdata For personal use only Australian PHI industry FY10 FY11 FY12 FY13 FY14 Total policyholders 5,549,338 5,727,566 5,936,660 6,118,351 - Policyholder growth 2.9% 3.2% 3.7% 3.1% Persons covered 11,561,299 11,901,915 12,321,848 12,680,337 Average age of hospi
Slide 30: Detailed income statement
MAIN HEADING GOES HERE Detailed income statement IN UPPERCASE PLEASE For personal use only ($m) FY10 FY11 FY12 FY13 FY14 %* Net premium revenue 901.4 1,007.8 1,123.8 1,290.4 1,491.6 15.6 - arhi 901.4 991.3 1,095.6 1,187.2 1,314.5 10.7 - iwhi3 - 16.01 25.2 27.6 28.7 4.0 - ishi - 0.5 3.0 4.4 9.2 110.8
Slide 31: Detailed management expenses
MAIN HEADING GOES HERE IN UPPERCASE PLEASE For personal use only Detailed management expenses (ammortisation) Total MER (%) Commissions Commissions Management Employment Commisions Occupancy Marketing Marketing Marketing Marketing Expenses (deffered) (Direct) (Paid) Other Total ($m) IT arhi FY10 37.
Slide 32: arhi claims: overall claims inflation
MAIN HEADING GOES HERE IN claims UPPERCASE PLEASE For personal use only arhi Overall claims inflation* (hospital and ancillary) 15.0% nib Industry * nib service cost nib utilisation nib annual drawing rate inflation (per SEU) incl. RE 10.0% 5.0% 0.0% -5.0% * At the time of finalising this presentati
Slide 33: arhi claims: hospital and ancillary claims inflation
MAIN HEADING GOES HERE arhi IN claims UPPERCASE PLEASE For personal use only Hospital claims inflation* 25% nib Industry * nib service cost nib utilisation nib annual drawing rate inflation (per SEU) incl. RE 20% 15% 10% 5% 0% Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun
Slide 34: Premium payback liability (nib New Zealand)
MAIN HEADING GOES HERE IN UPPERCASE paybackPLEASE For personal use only Premium liability (nib New Zealand) • Premium payback liability relates to products that were sold between 1992 - 2004 that are no longer on offer. Customers holding payback policies are entitled to receive a refund (or partial
Slide 35: Investment allocation
MAIN HEADING GOES HERE IN UPPERCASE asset PLEASE For personal use only Investment allocation Consolidated Australian Investment Portfolio New Zealand Investment Portfolio Net return ($m) Net return ($m) Balance ($m) Allocation (%) Allocation (%) Allocation (%) 12 months to 12 months to at 30/6/14 at
Slide 36: Balance sheet
MAIN HEADING GOES HERE IN UPPERCASE PLEASE For personal use only Balance sheet Change ($m) 30 June 14 30 June 13 ($m) (%) Assets Cash and cash equivalents 148.7 143.1 5.7 4.0 Receivables 44.9 51.9 (7.0) (13.5) Financial assets at fair value through P&L 410.8 351.8 59.0 16.8 Deferred acquisition cost
Slide 37: Available capital
MAIN HEADING GOES HERE IN UPPERCASE capital PLEASE For personal use only Available • As previously reported the introduction of the new PHIAC capital standards has resulted in a new internal capital target for nib health funds limited and has seen an increase in nib holdings limited group (the Group
Slide 38: Regulatory capital requirements
MAIN HEADING GOES HERE IN UPPERCASE capitalPLEASE For personal use only Regulatory requirements* • $18.7m of available capital across the Group above internal targets after allowing for final dividend, special dividend and holding company funding requirements with $7.3m of available capital held out
Slide 39: Disclaimer
MAIN HEADING GOES HERE IN UPPERCASE PLEASE For personal use only Disclaimer The material in this presentation is a summary of the results of nib holdings limited (nib) for the 12 months ended 30 June 2014 and an update on nib’s activities and is current at the date of preparation, 25 August 2014. Fu