NIB Holdings Ltd · ASX:NHF
NIB — Investor Presentation (October 2008)
38 slides from NIB's investor presentation, Oct 13, 2008
Slide 1: nib holdings limited Investor Presentation
nib holdings limited For personal use only Investor Presentation Mark Fitzgibbon, MD & CEO 13 October 2008
Slide 2: Today's agenda
Today’s agenda For personal use only Healthcare market & private health insurance Overview of nib FY08 Overview & Review FY09 Guidance, Outlook & Strategy Q&A 2
Slide 3: Healthcare market and private health insurance
For personal use only Healthcare market and private health insurance
Slide 4: The healthcare market is big and getting bigger
The healthcare market is big and getting bigger, growing at more than twice the rate of GDP For personal use only Total Australian healthcare expenditure During FY06, Australians spent approx. Total spending ($bn) (LHS) % GDP (RHS) $87bn on healthcare (public and private) 100 9.0% Spending repre
Slide 5: PHI plays a relatively small but important role in the healthcare economy
PHI plays a relatively small but important role in the healthcare economy For personal use only PHI represents only 7% of healthcare Total Australian PHI contributions of funding $11.2bn for FY07 The PHI industry’s value proposition: Other • access to private hospital and 8% Private health insur
Slide 6: The PHI industry is dominated by the top funds
The PHI industry is dominated by the top 5 funds For personal use only Top 5 PHI funds account for c80% of the At 30 June 2007 there were 39 PHI market registered health insurers, 37 of which conducted a health benefits fund, 23 of Other Funds which were open membership 10.8% organisations nib 6.6
Slide 7: Demand for PHI has gained momentum over the past years
Demand for PHI has gained momentum over the past 4 years For personal use only Total industry policyholder growth Individual out-of pocket spending is a rate has been increasing significant opportunity 5% Dental services 20% All other medications 20% 4.2% 4.2% 4% Ambulance and community health 5% 3%
Slide 8: A number of Government policies support PHI
A number of Government policies support PHI For personal use only Medicare Levy A surcharge of 1% of taxable income is levied on those income surcharge earners who do not have PHI with a low front end deductible or a low excess. Government is currently proposing a new amendment to the MLS income t
Slide 9: Potential for PHI growth is still significant
Despite the Government’s attempts to amend MLS income threshold limit, the potential for PHI growth is For personal use only still significant... Penetration1 by State is increasing Exposure to significant growth potential: Penetration Growth Jun 07 Jun 08 FY08 • almost 12m Australians do not NSW
Slide 10: Market outlook
Market outlook Market fundamentals are sound For personal use only Government will remain supportive of PHI given increasing dependency ratio Claims inflation will be between 5%-10% (subject to MLS impact) More rational and certain premium setting policy likely to emerge Industry growth post
Slide 11: Overview of nib
For personal use only Overview of nib
Slide 12: Business Strategy
Business Strategy For personal use only Organic growth with <40 years of age and new to category skew Build a national brand and footprint Shift distribution to new economy Pursue M&A Explore adjacent and complimentary new products/business opportunities Modernise the business 12
Slide 13: A number of factors have underpinned nib's strong growth
A number of factors have underpinned nib’s strong growth For personal use only Focus on target segment and “winning” culture Attractive products and value proposition • simplicity • ancillary bias • deductibles Price competitiveness • Basic Saver $9.95 Exposure and brand approachability • ma
Slide 14: FY08 Overview & Review
For personal use only FY08 Overview & Review
Slide 15: Overview
Overview For personal use only Very strong FY08 operating result • normalised net underwriting profit up 39.2% to $33.0m (FY07 - $23.7m) • normalised net underwriting margin of 4.4% (FY07 – 3.6%) • Normalised FY08 net profit after tax of $26.7m • small FY08 statutory accounting profit of $0.4m due
Slide 16: We are pleased about… strong policyholder and premium growth
We are pleased about… Strong policyholder and premium growth For personal use only nib continues to grow faster than its competitors Strong policyholder growth due to continued success of organic growth strategy 70,000 4.5% 60,000 • nib growing faster than industry, up 11.1% vs 4.2% for industry 5
Slide 17: The efficacy of our business strategy
We are pleased about… The efficacy of our business strategy For personal use only FY08 Prospectus FY05 FY06 FY07 FY08 Forecast Annualised growth in net 4.2% 3.9% 8.8% 11.1% 9.7% membership % of new sales new to category 68.7% 70.8% 74.4% 73.2% n/a % of new sales “under 40” 71.7% 73.6% 78.5% 78.8% n/
Slide 18: Strong operating performance – net margin up
We are pleased about… Strong operating performance – net margin up from 3.6% in FY07 to For personal use only 4.4% in FY08 Strong normalised net underwriting Lower normalised Management Expense margin Ratio (MER)... 12% 10% 8.4% FY08 Prospectus Fcst 8% 11% 6% 4.4% 2.9% 3.6% 10% 4% 2% 9% 0% 8% FY05 F
Slide 19: We are not so pleased about…
We are not so pleased about… For personal use only Investment market volatility continues to impact earnings • we are carefully managing our investment portfolio with the aim to reduce volatility of investment earnings and release or deploy excess capital • current investment market conditions con
Slide 20: Investment assets & capital management
Investment assets & capital management For personal use only Investment assets of $453.0 million at 30 June 2008 with a 73% defensive/27% growth mix We have a strong capital position • $105.6m excess capital above internal target • ungeared balance sheet Our strong balance sheet and capital po
Slide 21: FY09 Guidance, Outlook & Strategy
For personal use only FY09 Guidance, Outlook & Strategy
Slide 22: nib updated guidance for FY09
nib updated guidance for FY09 For personal use only Due to continuing MLS uncertainty, nib updated guidance for FY09 on 25 September 2008 nib’s updated guidance is based on Government’s proposed compromise ($75,000 for singles, $150,000 for couples) ultimately being accepted by the Senate • Net
Slide 23: Business outlook
Business outlook nib continues to capture a large component of market growth For personal use only nib policyholder numbers consistently Second largest growth in number of total growing faster than top 5 funds policyholders over FY08... Medibank MBF BUPA HCF HBF nib 70,000 20% 60,000 15% 50,000 10%
Slide 24: Uncertainty regarding MLS changes
Uncertainty regarding MLS changes In May this year the Government announced in the Federal Budget that it proposed to increase the For personal use only MLS annual income threshold limit to $100,000 for singles and $150,000 for couples In September the Government proposed a compromise to the Bil
Slide 25: We have a clear view of what will drive earnings
We have a clear view of what will drive earnings We continue to target a net underwriting margin of 5% and ROE of at least 15% For personal use only and expect to reach these targets in the near term Business strategy Earnings and ROE Organic growth with <40 skew Continue to target 5% net underw
Slide 26: Summary
Summary For personal use only The Australian healthcare economy is forecast to continue to grow at >GDP Even after the Government’s proposed changes to MLS, there is significant potential to grow the PHI category Our organic growth strategy has been very successful in growing market share, and
Slide 27: For personal use only
nib} CoolangattaGold’07 = nib holdings a a
Slide 28: Mark Fitzgibbon, MD & CEO
For personal use only Investor Presentation Mark Fitzgibbon, MD & CEO 13 October 2008
Slide 29: Appendix
For personal use only Appendix
Slide 30: Data sheet – nib
Data sheet – nib FY03 / at FY04 / at FY05 / at FY06 / at FY07 / at FY08 / at For personal use only 30 Jun 03 30 Jun 04 30 Jun 05 30 Jun 06 30 Jun 07 30 Jun 08 nib Total policyholders 255,812 279,272 290,940 302,299 328,784 365,389 Policyholder growth 9.2% 9.2% 4.2% 3.9% 8.8% 11.1% Market share 5.5%
Slide 31: Data sheet – PHI industry
Data sheet – PHI industry For personal use only FY03 / at FY04 / at FY05 / at FY06 / at FY07 / at FY08 / at 30 Jun 03 30 Jun 04 30 Jun 05 30 Jun 06 30 Jun 07 30 Jun 08 PHI industry Total policyholders 4,649,268 4,671,430 4,708,420 4,806,754 5,008,329 5,219,567 Policyholder growth 1.2% 0.5% 0.8% 2.1%
Slide 32: Data sheet – nib normalised financials
Data sheet – nib normalised financials FY08 For personal use only Prospectus ($m) FY05 FY06 FY07 forecast FY08 PROFIT & LOSS Premium revenue 530.7 611.9 666.0 750.7 758.2 Gross underwriting result 71.7 111.8 94.9 102.0 111.2 Net underwriting result 15.4 51.4 23.7 18.7 33.0 Investment & other income
Slide 33: Normalised profit & loss reconciliation
Normalised profit & loss reconciliation Significant one-off costs in FY08 re demutualisation/listing result in $0.4m statutory profit For personal use only FY08 FY07 % change ($m) Statutory Adjust Pro forma Statutory Adjust Pro forma FY08 vs FY07 Premium revenue 758.2 - 758.2 666.0 - 666.0 13.8% N
Slide 34: Financial results – underlying results
Financial results – underlying results Net underwriting result up $9.3m or 39.2% on FY07 For personal use only Underlying results split out Investment income between: • Normalised investment income – calculated on the basis of a 7% assumed return over average investment assets for the period • Inv
Slide 35: Balance sheet
Balance sheet Robust balance sheet remains ungeared For personal use only Balance sheet ($m) At Jun 08 Jun 07 OSC is 9.6% of claims expenses for Health fund operating assets FY08 (FY07 – 9.5%) Current assets 32.1 26.6 Non-current assets 71.6 40.0 • 87% of benefits are paid within two months (FY07
Slide 36: Normalised cash flow reconciliation
Normalised cash flow reconciliation FY08 FY07 For personal use only ($m) Statutory Adjust Pro forma Statutory Adjust Pro forma Receipts from policyholders & customers 766.0 - 766.0 719.4 (47.9) 671.5 Payments to customers, suppliers, emp’ees (764.9) 45.2 (719.7) (673.8) 51.3 (622.5) Sub-total 1.1 45
Slide 37: Risk Equalisation Levy
Risk Equalisation Levy For personal use only Risk Equalisation averages out the cost of hospital treatment across the PHI industry. The scheme transfers money from those organisations that are demographically younger and healthier, with lower claims payments, to those with an older and less health
Slide 38: 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 2008 and an update on nib’s activities and is current at the date of preparation, 13 October 2008. Further details are provided in the Company’