NIB HOLDINGS LIMITED 2 October 2015 The Manager
Company Announcements
Australia Securities Exchange Limited Level 4, Bridge Street
SYDNEY NSW 2000
Presentation to J.P. Morgan Access Days - October 2015
nib holdings limited Head Office
22 Honeysuckle Drive
Newcastle NSW 2300
abn 51 125 633 856
t 13 14 63
f 02 4925 1999
e nib@nib.com.au
w nib.com.au
Attached presentation to be delivered by nib at the J.P. Morgan Access Days from 5 October 2015. All information contained within this presentation has been previously disclosed to the ASX.
Yours sincerely
Michelle McPherson
Company Secretary/Chief Financial Officer
J.P. MORGAN
ACCESS DAYS 2015
HIUT'S
MGOODATO BNE
October 2015 | All figures in this document are represented in Australian dollars unless otherwise stated
2
Agenda
Healthcare in Australia
About nib Our performance
Business Strategy
Appendix
Key performance metrics and outlook
3
Healthcare in Australia
Growth in healthcare spending driven by; wealth effect, ageing, rise of chronic disease, cost of new technology, supply induced demand and moral hazard.
$147.4b
2013 | Australian healthcare spending ($b)
Australian treasury projection
Health Aged care Age/service pensions
Education Defense
5.0
Components of healthcare spending
40% 18% 14% 7% 5% 16%
GDP (%)
4.0
3.0
2.0
1.0
Hospitals Medical services
Medicines Dental Services
Community health
Other
0.0
2014/15
2024/25
2034/35
2044/45
2054/55
Source: AIHW 2013 Health Expenditure Australia
Source: Treasury Projections (2015 Intergenerational Report)
4
The role of Private Health Insurance (PHI)
Australian PHI growth drivers:
Increasing wealth and favourable economic circumstances
Dissatisfaction with public system and rationing
Competition and investment in marketing and growth
Government 'sticks and carrots'
What PHI does and doesn't cover
Public & Private Hospital
Medical specialist
Medical specialist
Pharmaceuticals In hospital
Pharmaceuticals outside hospital
Diagnostics (x-ray, blood
Diagnostics (x-ray, blood
(accommodation,
(surgeon,
(surgeon,
tests) in
tests) outside
(dental, optical,
theatre, etc), choice
anaesthetist )
anaesthetist )
hospital
hospital
etc)
of specialist
in hospital
outside hospital
General Treatment cover
Ambulance
5
PHI structure in Australia
At 30 June 2014 there were 34 private health insurers operating in Australia. Top five PHI players represent 83% of the polices nationally.
For profit insurers make up around 68% of the industry. Direct to Consumer (DTC) accounts for ~85% sales.
Policies are community rated (i.e. not risk rated).
Approximately 56% of population have private health insurance.
Private Health Insurance
8%Medibank BUPA HCF HBF
nib
Other
* Source: Private Health Insurance Administration Council - The Operations of Private Health Insurers Annual Report 2013-14
6
About nib (ASX: NHF)
FY15 Group premium revenue of
$1.63b, operating profit of $81.7m, net profit after tax of $75.3m
More than 1,000 employees in Australia and New Zealand
Australia's 4th largest private health insurer, New Zealand's 2nd largest private health insurer
Market capitalisation ~$1.4b (439m shares on issue,
75% retail: 25% institution)
Approximately 1.3 million customers throughout Australia and New Zealand
PHI markets Australian residents New Zealand residents International workers International students
Other markets* Travel Insurance Life Insurance
nib Options - domestic and international cosmetic treatment (launched in
March 2014)
Recent M&A
TOWER Medical Insurance Limited acquired November 2012 for approximately $73m (purchase price was $81.3m, which included $7.9m in surplus capital, which equates to approximately $73m)
World Nomads Group acquired July 2015 for total consideration of $95m (Australia's third largest distributor of travel insurance)
* Non-underwriting
7
Business Strategy
Achieve above 'system' growth in the Australian Insurance Resident Health (arhi) market.
Grow our International Workers (iwhi) and International Students (ishi) market share.
Position and build our business in New Zealand as a 'challenger' and grow the market and our share.
Leverage core business capabilities to pursue adjacent business opportunities.
Design product benefits and manage claims in accordance with our strategic and commercial objectives.
Develop 'Whitecoat' and our digital platform to create an unrivalled customer experience and support health and clinical decision making by customers.
Increase customer satisfaction, productivity and efficiency.
Have the 'right people on the bus', develop a high performance organisational culture and advance the engagement of our people.
8
FY15 nib
Group performance metrics
Premium Revenue Operating Profit
Earnings per share
1.6b 81.7m 17.3cNet profit after tax
75.3mReturn on Equity Dividends per share
23.1%9
arhi key performance metrics and outlook
FY15
Surpassed 1 million customers covered. Annual net policyholder growth of
4.7% versus 2.5% for the industry, with nib accounting for almost 15% of industry growth.
Net margin of 5.0%, within 5.0% to 5.5% target range
Above system policyholder growth for nib with focus upon under 40s and over 55s. nib has achieved above industry annual policyholder growth for over a decade.
We expect the market to continue to grow and to increase our market share and earnings.
System growth will continue for a number of reasons, including inevitable funding shift from Government to private sector.
Premium revenue up 8.8% to
$1.4 billion
Net growth remains highly value accretive. nib's target net margin range is 5%-5.5%.
Lapse rate clearly indicates growth is not without headwinds. Downgrading while present, is not impacting top line growth and profitability.
M&A prospects remain limited but logic of industry consolidation remains compelling. Impending Government review of PHI.
10
International and new business
FY15
International (Inbound) Health Insurance business Operating profit up 4.0% to
$11.8 million
Insuring almost 88,000 international students and overseas visitors (up 54.2%)
Acquisition of travel insurance provider World Nomads Group
'Complementary' business will continue to make a major contribution to pre-tax operating earnings and further opportunities are very real.
International (Inbound) Health Insurance business (students and workers) policyholder growth but profitability may be weaker. Need for more assertive care co-ordination evident.
World Nomads Group (WNG) underlying1 FY16 operating profit of at least $10m.
Excluding one-off transaction costs and amortisation of acquisition related identifiable intangibles.
11
nib New Zealand key performance metrics and outlook
FY15
Direct-to-consumer account for approximately 50% of all sales
Policyholder growth of 5.9%
Premium revenue up 8.1% to
$150.4 million
nib New Zealand profitability to improve in FY16 due to improved scale and growth. Further investment in DTC, a focus on advisor channel, a renewed effort on group/employer market, third party distribution and M&A.
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