Nib Holdings Ltd · ASX:NHF
Nib — H1 2014 Earnings Presentation
40 slides from Nib's earnings presentation, Feb 24, 2014
Slide 1: ASX cover letter on corrected slide 32
nib holdings limited t 13 14 63 Head Office f 02 4925 1999 22 Honeysuckle Drive Newcastle NSW 2300 e [email protected] abn 51 125 633 856 w nib.com.au Monday 24 February 2014 For personal use only The Manager Company Announcements ASX Limited 20 Bridge Street Sydney, NSW, 2000 Subject: 2014 Half Year R
Slide 2: 2014 Half Year Results Investor Presentation
2014 HALF YEAR RESULTS INVESTOR PRESENTATION MONDAY 24 FEBRUARY 2014 = = © @ Q = © ‘= S Q — @ oe = © UL nib
Slide 3: Mark Fitzgibbon, CEO and Managing Director
MARK FITZGIBBON CEO AND MANAGING DIRECTOR = = © @ Q = © ‘= S Q — @ oe = © UL
Slide 4: 1H14 Group Summary
1H14 Group Summary For personal use only • Group operating profit of $41.4m up 18.5% (1H13: $34.9m) on the back of growth in all segments. Improvement driven mainly by Group operating revenue which was up 20.0% including nib NZ (noting 1H13 nib NZ was a 1 month result1) • arhi net underwriting resul
Slide 5: Group Key Metrics
Group Key Metrics 1H14 1H13 %* For personal use only Group premium revenue1 735.4 612.8 20.0 - Australian Resident Health Insurance (arhi) 649.7 586.7 10.7 - International Workers Health Insurance (iwhi)1 14.3 13.8 3.7 - International Students Health Insurance (ishi) 3.9 2.1 82.9 - nib New Zealand2
Slide 6: Total Shareholder Return
Total Shareholder Return For personal use only nib has delivered a strong shareholder return since listing, having substantially outperformed various accumulation indices Total shareholder return (rebased to 100) 500 nib All Ords Accumulation Index 375.7% 450 400 350 300 250 200 150 100 4.0% 50 0 No
Slide 7: Michelle McPherson, CFO and Deputy CEO
MICHELLE MCPHERSON CHIEF FINANCIAL OFFICER AND DEPUTY CEO = = © @ Q = © ‘= S Q — @ oe = © UL
Slide 8: Group Income Statement
Group Income Statement ($m) 1H14 1H13# %* For personal use only Group premium revenue1 735.4 612.8 20.0 Claims expense1 (501.1) (419.4) 19.5 Risk equalisation (100.9) (83.9) 20.3 State levies (14.1) (15.3) (7.4) Premium payback liability movement 2.7 0.6 375.1 Gross profit 122.1 94.8 28.8 - Gross pr
Slide 9: arhi Key Metrics
arhi Key Metrics 1H14 1H13 %* For personal use only Total policyholders 484,541 462,359 4.8 - Net policyholder growth (%) 2.6 2.4 0.2 Net new policyholders 12,277 10,712 14.6 Total sales 37,002 32,142 15.1 - Sales rate (%) 7.8 7.1 0.7 - Sales new to category (%) 52.8 64.1 (11.3) - Sales under 40 yea
Slide 10: arhi Key Metrics
arhi Key Metrics ($m) 1H14 1H13 %* For personal use only Premium revenue 649.7 586.7 10.7 - % of total Group 88.3% 95.7% (7.4) Claims (including state levies, excluding risk (462.1) (420.0) 10.0 equalisation) Risk equalisation (100.9) (83.9) 20.3 Gross underwriting result 86.7 82.9 4.6 - Gross margi
Slide 11: iwhi Key Metrics
iwhi Key Metrics ($m) 1H14 1H13 %* For personal use only Total policyholders 19,215 16,880 13.8 Premium revenue1 14.3 13.8 3.7 - % of total Group 2.0% 2.3% (0.3) Claims1 (6.0) (6.6) (8.6) Gross underwriting result 8.4 7.3 14.8 - Gross margin (%) 58.3% 52.6% 5.7 Management expenses (3.6) (3.5) 3.6 -
Slide 12: ishi Key Metrics
ishi Key Metrics ($m) 1H14 1H13 %* For personal use only Total policyholders 15,408 4,680 229.2 Premium revenue 3.9 2.1 82.9 - % of total Group 0.5% 0.4% 0.1 Claims (1.9) (1.8) 7.7 Gross underwriting result 2.0 0.4 458.7 - Gross margin (%) 51.0% 16.7% 34.3 Management expenses (1.2) (0.4) 247.8 - MER
Slide 13: nib New Zealand Key Metrics
nib New Zealand Key Metrics ($m)* 1H14# For personal use only Total policyholders 79,000 Premium revenue 67.5 - % of total Group 9.2% Claims (45.2) Decrease in premium payback liability 2.7 Gross underwriting result 25.0 - Gross margin (%) 37.1% Total management expenses (21.8) - MER (%) 32.3 Acquis
Slide 14: Other Income & Expenses
Other Income & Expenses For personal use only ($m) 1H14 1H13 %* Other Income Life and funeral insurance commission 0.9 0.7 20.1 Travel insurance and other commission 0.2 0.2 2.1 Rental income 0.4 0.4 2.0 nib Options subscription income 0.2 - NA Other 0.4 0.3 67.7 Total other income 2.1 1.6 36.6 Othe
Slide 15: Gross Profit Drivers
Gross Profit Drivers 140.0 For personal use only 33.8 0.3 $6.5m 130.0 27.5 20.7 120.0 122.1 110.0 23.6 1.4 2.3 1.6 100.0 17.2 1.1 2.0 2.3 0.9 ($m) 12.9 1.2 1.3 90.0 94.8 $(3.6)m 80.0 70.0 60.0 • Premium revenue – product mix of $1.4 million due to success of product buy-up initiatives reverses histo
Slide 16: Investments
Investments * For personal use only * 1H net investment returns are annualised figures • Net investment return of 6.4% (1H13: 7.6%) outperformed internal benchmarks • Shift in defensive/growth asset allocation from 80%/20% (for Australian regulatory capital) to 75%/25% with no change to internal ben
Slide 17: NPAT Summary
NPAT Summary For personal use only 70.0 65.0 20.7 60.0 3.2 0.1 0.8 55.0 ($m) 50.0 45.0 1.6 1.1 2.3 3.8 0.6 40.0 19.5 1.1 39.6 1.7 0.4 35.0 36.3 30.0 • 1H14 nib New Zealand a 6 month result (1H13 a 1 month result with business acquired in November 2012) • Decrease in other expenses due to one-off acq
Slide 18: Cash Flow
Cash Flow ($m) 1H14 1H13 % For personal use only Net cash inflow/(outflow) from operating 26.3 5.0 424.1 Net cash inflow/(outflow) from investing (31.5) (8.6) (265.7) Net cash inflow/(outflow) from financing (22.5) 32.6 (168.9) Net increase (decrease) in cash and cash equivalents (27.6) 29.0 (195.2)
Slide 19: Available Capital Position
Available Capital Position 1H14 1H13 For personal use only Opening available capital position above current internal targets ($m) ($m) 14.8 13.3 Investment in TOWER Medical New Zealand (nib New Zealand) - (18.7) Allowance for interim dividend (23.0) (22.0) Changes in forecast, liabilities and capita
Slide 20: Mark Fitzgibbon, CEO and Managing Director
MARK FITZGIBBON CEO AND MANAGING DIRECTOR = = © @ Q = © ‘= S Q — @ oe = © UL
Slide 21: Outlook - arhi
Outlook - arhi For personal use only • Continued organic policyholder growth of ~ 4% for FY14 (consistent with target sustainable growth rate) and expected to be 1.5x industry. Ongoing strategy to target <40s (traditional DTC distribution channels) with additional focus on >55s (through retail broke
Slide 22: Outlook - iwhi & ishi
Outlook - iwhi & ishi For personal use only iwhi • Policyholder and revenue growth to continue with over 20,000 policyholders forecast by end of FY14 • Visa pipeline expected to remain strong. Upstream relationships with foreign distributors (e.g. United Healthcare) forecast to grow • MER expected t
Slide 23: Outlook - nib New Zealand
Outlook - nib New Zealand 81,000 80,500 80,000 For personal use only 79,500 Number of nib NZ inforce policies 79,000 Tower nib 78,500 98,720 78,000 95,941 77,500 92,446 77,000 Apr 13 Jul 13 Oct 13 Dec 12 Aug 13 Sep 13 Nov 13 Dec 13 Jan 13 May 13 Jun 13 Jan 14 Feb 13 Mar 13 87,880 85,988 82,296 80,36
Slide 24: Outlook - New Business
Outlook - New Business nib Options For personal use only • To be launched in March • Initial efforts focus upon cosmetic surgery • Value proposition centred around trustworthiness, safety and choice. Includes domestic surgery as an option • Overseas option involves bundling of transport, medical, ac
Slide 25: FY14 Guidance
FY14 Guidance For personal use only • FY14 consolidated operating profit forecast continues to be in the range of $73m to $80m • FY14 investment income forecast to be line with relevant internal benchmarks 24
Slide 26: Appendix
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Slide 27: For personal use only
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Slide 28: nib Policyholder & Other Data
nib Policyholder & Other Data nib Group 1H11 FY11 1H12 FY12 1H13 FY13 1H14 For personal use only Total policyholders 430,582 446,504 457,768 471,455 564,286 578,659 598,164 − arhi 417,776 431,173 440,707 451,647 462,359 472,264 484,541 − iwhi 12,373 13,899 14,960 16,480 16,880 18,071 19,215 − ishi 4
Slide 29: Australian PHI Industry Policyholder Data
Australian PHI Industry Policyholder Data For personal use only 1H11 FY11 1H12 FY12 1H13 FY13 1H14 Total policyholders 5,628,419 5,727,566 5,815,019 5,936,660 6,012,420 6,118,351 6,186,569 - Policyholder growth 1.4% 3.2% 1.5% 3.7% 1.3% 3.1% 1.1% Total persons covered 11,733,719 11,901,915 12,090,453
Slide 30: nib & Industry Annual Premium Price Increases (arhi)
nib & Industry Annual Premium Price Increases (arhi) nib Industry For personal use only Annual CAGR* Annual CAGR* 2002 2.80% 2.80% 6.90% 6.90% 2003 3.20% 3.00% 7.40% 7.15% 2004 9.10% 4.99% 7.58% 7.29% 2005 13.86% 7.14% 7.96% 7.46% 2006 4.85% 6.68% 5.68% 7.10% 2007 4.65% 6.34% 4.52% 6.67% 2008 4.99%
Slide 31: Detailed Income Statement
Detailed Income Statement ($m) 1H12 2H12 FY12 1H13 2H13 FY13 1H14 %* For personal use only Premium revenue 554.4 569.4 1,123.8 612.8 677.6 1,290.4 735.4 20.0 - arhi 540.9 554.7 1,095.6 586.7 600.5 1,187.2 649.7 10.7 - iwhi3 12.3 12.9 25.2 13.8 13.8 27.6 14.3 3.7 - ishi 1.2 1.8 3.0 2.1 2.2 4.4 3.9 82
Slide 32: Detailed Management Expenses
Detailed Management Expenses Total MER (%) Commissions Management Employment Commisions Occupancy Marketing Marketing Marketing Expenses (deffered) For personal use only (Direct) (Paid) Other Total ($m) IT arhi 1H12 22.3 8.3 4.0 - 3.8 3.1 6.6 48.1 8.9 2H12 23.1 12.1 6.6 (8.2) 3.7 2.7 7.2 47.2 8.5 FY
Slide 33: arhi Claims
arhi Claims For personal use only Overall claims inflation (hospital and ancillary) 15.0% Industry nib service cost nib utilisation nib annual drawing rate inflation (per SEU) incl. RE 10.0% 5.0% 0.0% Source: Private Health Insurance Administration Council and nib All figures exclude ishi, iwhi and
Slide 34: arhi Claims
For personal use only -10% -5% 0% 5% 10% 15% 20% 25% -5% -10% 0% 5% 10% 15% 20% 25% Sep-01 Sep-01 Dec-01 Dec-01 Mar-02 Mar-02 Jun-02 Jun-02 Sep-02 Sep-02 Dec-02 Dec-02 Mar-03 Mar-03 nib Jun-03 Jun-03 Sep-03 Sep-03 arhi Claims Dec-03 Dec-03 Mar-04 Mar-04 Jun-04 Jun-04 Sep-04 Sep-04 Industry Hospital
Slide 35: Premium Payback Liability (nib New Zealand)
Premium Payback Liability (nib New Zealand) • Premium payback liability relates to products that were sold between 1992 and 2004 that are no longer on offer. Customers holding payback policies are entitled to receive a refund (or partial refund) of premiums paid less any claims made once the For per
Slide 36: Investments
Investments For personal use only Consolidated Australian Investment Portfolio New Zealand Investment Portfolio Net return ($m) Balance ($m) Allocation (%) Allocation (%) Net return ($m) Allocation (%) 6 months to at 31/12/13 at 31/12/13 at 31/12/13 6 months to 31/12/13 at 31/12/13 31/12/13 Cash 101
Slide 37: Balance Sheet
Balance Sheet Change ($m) 31-Dec-13 30-Jun-13 For personal use only ($m) (%) Assets Cash and cash equivalents 116.0 143.1 (27.1) (18.9) Receivables 43.4 51.9 (8.5) (16.4) Financial assets at fair value through P&L 404.7 351.8 52.9 15.0 Deferred acquisition costs 35.4 27.2 8.2 30.1 Property, plant an
Slide 38: Capital Adequacy
For personal use only Capital Adequacy 37
Slide 39: Regulatory Capital Requirements
Regulatory Capital Requirements For personal use only • $15.1m of available capital across the Group above internal targets after allowing for interim dividend and holding company funding requirements Australian fund capital allocation New Zealand fund capital allocation (at 31 December 2013) (at 31
Slide 40: Disclaimer
Disclaimer The material in this presentation is a summary of the results of nib holdings limited (nib) for the 6 months ended 31 December 2013 and an update on For personal use only nib’s activities and is current at the date of preparation, 24 February 2014. Further details are provided in nib’s ha