nib 2012 strategy briefing

Monday 25 June 2012

Agenda

2

9.00am Business Strategy updateMark Fitzgibbon - CEO & Managing Director

9.45amOrganic growthRhod McKensey - Chief Marketing OfficerJames Barr - Group Manager Marketing and Products

10.30am Morning tea

10.45amClaims experience Rhod McKensey - Chief Marketing OfficerGavin Ward – Business Intelligence Manager

11.30amContinuous improvement & technology Adam Novak – Quality Improvement ManagerBrendan Mills – Chief Information Officer

12.15pm Lunch

12.45pm International BusinessMatt Henderson - Group Executive Corporate & International Business

1.30pm FinanceMichelle McPherson - Chief Financial Officer & Deputy CEO

2.15pm Questions & wrap up

3.00pm Close

Business Strategy

Mark Fitzgibbon

Business strategy

4

ENTERPRISE VALUE

Domestic HIB growth

Organisational efficiency & performance

International business

Not business strategy

Health management organisation (HMO) Vertical integration Third party administration Aged care Life/general insurer

5

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

International business

International workers business (IWB)

International students business (ISB)

Other • Outbound Australian/

International Private Medical Insurance (IPMI)?

• New Zealand?

7

Organisational efficiency & performance

Claims inflation People & culture Information technology Innovation Capital management

8

Questions

Organic GrowthRhod McKensey – Chief Marketing Officer

James Barr – Group Manager Marketing and Products

Organic growth strategy

11

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, retention and product “buy up” Increase complementary product sales and earnings Renew efforts to pursue corporate market with a particular focus on the

mining sector Maintain marketing and broker expenditure subject to return on investment

criteria

Industry policyholder growth

0

10000

20000

30000

40000

50000

60000

70000Num

ber o

f policyholde

rsIndustry net policyholder growth by state

WA

VIC

QLD

NSW

Industry growth continues to become more seasonal, driven by industry spend and Government Initiatives

Despite uncertainty surrounding changes to the Federal Rebate and Medicare Levy Surcharge growth remained strong in the March 2012 quarter

Source: PHIAC

12

nib policyholder growth

-1,000

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000N

umbe

r of p

olic

yhol

ders

nib net policyholder growth by state

WA

VIC

QLD

NSW

With just under 8% market share, we continue to perform solidly accounting for 11% of total industry growth in the nine months to 31 March 2012

Nine months to 31 March 2012 net policyholder growth of 3.3% (PCP: 3.7%) Growth in NSW and Victoria remains strong, particularly in the June and September quarters Despite a high level of competitor investment WA continues to build. Over the last 12 months we

have invested in improving our hospital and provider network in WA

13

Source: nib

Growth in target segment

Organic growth investment heavily skewed towards peak acquisition period in June Nine months to 31 March 2012 nib accounted for 22.1% of industry net policyholder

growth in target segment (PCP: 23.8%)

Growth in 20-39 hospital persons covered FY07 FY08 FY09 FY10 FY11 FY12 to 31

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 attributed to nib (%) 18.6 20.1 25.5 31.0 24.0 22.1

14

Source: PHIAC and nib

Industry media spend

0

20

40

60

80

100

120

140

FY07 FY08 FY09 FY10 FY11 FY12

($m

)

Estimated Industry Advertising (TV) SpendOther Iselect HBF Medibank/AHM Bupa/MBF HCF/MU nib

Source: Neilson AdQuest 2012 and nib analysis

Since 2007 category spend has increased by almost $90m, mainly driven by an increase in investment by BUPA, Medibank Private & iSelect

F

15

Organic growth ROI

16

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

ROI on organic growth remains attractive and current cost per acquisition is well below breakeven

Acq

uisi

tion

cost

per

sal

e (ro

lling

12 m

onth

s)

Source: nib

Customer retention a key area for business improvement

17

Source: nib

Lapse (nib) FY07 FY08 FY09 FY10 FY11 FY12 to 31 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 40.8 38.6* Annualised.

Two biggest areas of customer lapse are switching (other funds) and customers who fall into arrears

Initiatives currently underway:• New customer onboarding (part of TLC* initiative)• Promotion of direct debt preferred payment• Outbound calls to high-risk customer groups• Promotion of prepayment of premiums• Ongoing testing of trigger-based migration campaigns

Improvements in lapse will be the result of many small changes rather than any “silver bullets”

* TLC is nib’s quality improvement initiative which we have called Think Like the Customer or TLC

Virgin Silver

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Industry: Hospital Persons Covered Growth

60 Plus

40-59

20-39

0-19

Continued growth in the older age segment due to ageing of existing customer base Niche market opportunity due to lack of competition and size of segment Young at Heart (YAH) product range designed specifically to target this opportunity

18

Source: PHIAC

Executing organic growth strategy

19

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, emphasising rational

attributes of value for money and simplicity and the emotional attribute of approachability/trustworthiness (via our brand ambassador Paul Harragon)

Discreet targeting of the over 55 segment Use online brokers such as iSelect judiciouslyProduct offering Make it as simple as possible for customers to interact with us, continued investment

in new and improved technology Focus on product development and innovation Migrate existing customers to higher value products as their life stage and needs

change Limited use of offers, in most cases they destroy value

Questions

Claims experienceRhod McKensey – Chief Marketing Officer

Gavin Ward – Business Intelligence Manager

Total claims

22

($m) FY10 FY11 FY11 (% of claims) FY11 v FY10 (%)

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 -- IWB claims expense - (7.6) 0.9 -

HIB Risk equalisation levy (109.9) (132.7) 15.6 20.7- OSC risk equalisation margin (2.9) (0.7) 0.1 -75.9- Gross deficit 147.9 160.3 -18.9 8.4- Calculated deficit (254.9) (292.3) 34.4 14.7

HIB state levies (22.0) (22.9) 2.7 4.1Net claims incurred (767.9) (848.7) 100.0 10.5

Payments for hospital admissions (theatre, accommodation, medical and prosthesis) make up over half of the total claims expenses for the group

Ancillary (dental, optical, physio, chiro, natural therapies, etc.) around a quarter Net risk equalisation payments are currently less than 20% of total claims costs, but are

growing at more than twice the rate of benefits inflation State levies, IWB and ISB make up less than 5% of total claims expenses

Source: nib

IWB = International Workers Business, ISB = International Students Business

Hospital

23

All figures excludes International Workers Business and International Students Business, unless otherwise stated

Source: nib and PHIAC

Industry hospital drawing rate inflation has averaged approximately 6% over the last 3 years nib’s hospital inflation has been averaging approximately 5.5% over the last 3 years Better than industry utilisation inflation (0.2% versus 1.5%) and service cost inflation (3.7%

versus 4.2%) is offset by high Risk Equalisation inflation

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Jun-

06

Sep-

06

Dec-

06

Mar

-07

Jun-

07

Sep-

07

Dec-

07

Mar

-08

Jun-

08

Sep-

08

Dec-

08

Mar

-09

Jun-

09

Sep-

09

Dec-

09

Mar

-10

Jun-

10

Sep-

10

Dec-

10

Mar

-11

Jun-

11

Sep-

11

Dec-

11

Mar

-12

Industry

nib (post RE)

nib (pre RE)

nib service cost

nib utilisation

Hospital drawing rate inflation

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 allows us to achieve mutually beneficial outcomes

• IWB customers (IMAN) are now using nib (HIB) hospital contracts, which has lowered service cost for IWB

Utilisation• Due to hospital waiting periods there is a strong relationship between relative

customer growth and utilisation. As customer growth (new to category) increases utilisation declines in the short-term. This is most evident in the favourable experience seen in the period following the 11.1% policyholder growth in FY08.

• The popularity of our products with exclusions, restrictions and excesses also has a favourable impact on utilisation

24

HIB = Health Insurance Business, IWB = International Workers Business

Ancillary

25

Note: industry data from 1 April 2007- 31 December 2010 is not comparable due to change in the way ancillary products are determined by PHIAC

All figures excludes International Workers Business and International Students Business, unless otherwise stated

Overall inflation of 4.4% to March 2012 is the same as the industry average Ancillary inflation was affected by the introduction of the Loyalty Bonus scheme in June 2006

and it’s subsequent removal in May 2009 Service cost inflation (nib 2.5% v industry 2.9%) is largely a function of changes in CPI Annual limits on ancillary modalities mitigate increases in utilisation (nib 1.9% v industry 1.4%)

-10%

-5%

0%

5%

10%

15%

20%

25%

Jun-

06

Sep-

06

Dec-

06

Mar

-07

Jun-

07

Sep-

07

Dec-

07

Mar

-08

Jun-

08

Sep-

08

Dec-

08

Mar

-09

Jun-

09

Sep-

09

Dec-

09

Mar

-10

Jun-

10

Sep-

10

Dec-

10

Mar

-11

Jun-

11

Sep-

11

Dec-

11

Mar

-12

Industry

nib

nib service cost

nib utilisation

Ancillary drawing rate inflation

Source: nib and PHIAC

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 percentage of charge, rather than a fixed amount

Utilisation• Customer growth has a smaller impact on ancillary utilisation than hospital given the

waiting periods are generally shorter, and some ancillary waiting periods are waived as part of campaign-based sales incentives

• Given the higher service cost on our products that pay benefits as a percentage of charge, customers are more likely to hit their annual limit than they were in the past

Seasonality• Higher claims costs are experienced in the first half of the calendar year as annual

limits are reset on 1 January each year• Across FY10 and FY11, 53% of costs have been between January and June

26

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 based on the patients age (for example, we receive 15% of the hospital, medical and/or prostheses claims payments back for a 57 year old)

Calculated deficit (what we ‘pay into’ the pool)• The gross deficit amounts for each fund are aggregated and divided by the total

number of hospital SEUs (single equivalent units) in the industry (by state)• The “state average deficits” are then multiplied by the number of hospital SEUs in

each state for each fund to determine the amount payable to the pool for each fund

27

Patient age (at date of service) %

< 55 0.055 – 59 15.060 – 64 42.564 – 69 60.070 – 74 70.075 – 79 76.080 – 84 78.085 + 82.0

Risk equalisation

The chart below shows the correlation between age and net risk equalisation contribution/receipt

28

30

35

40

45

50

55

-$150 -$125 -$100 -$75 -$50 -$25 $0 $25 $50 $75 $100 $125 $150

Aver

age

Age

Net Risk Equalisation per SEU

nib

Source: nib and PHIAC

nib Other funds

Risk equalisation

nib’s gross deficit has remained relatively stable as a proportion of the total RETF (around 4%), while its calculated deficit has grown with increases in market share and the RETF

29

0

200

400

600

800

1,000

1,200

0%

1%

2%

3%

4%

5%

6%

7%

8%

Jun-

06

Sep

-06

Dec

-06

Mar

-07

Jun-

07

Sep

-07

Dec

-07

Mar

-08

Jun-

08

Sep

-08

Dec

-08

Mar

-09

Jun-

09

Sep

-09

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Tota

l Poo

l / Q

tr ($

m)

Total Pool

Received %

Paid %

Source: nib and PHIAC

Total industry pool (RHS)

nib gross deficit (amount received) as a % of total pool (LHS)

nib calculated deficit (amount paid) as a % of total pool (LHS)

Claims management

30

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 Claims rules and analysis

Questions

Continuous ImprovementAdam Novak

Quality Improvement Manager

TLC: Think like the customer

33

TLC is about putting the customer at the heart of everything we do to improve customer experience ... and in turn improving business

performance

Increased customer retention

Increased sales

Reduced management

expenses

Increased customer

satisfactionIncreased scalability

Increased employee

engagement

To improve the customer experience we must first understand what our customers want…

34

Voice of Customer and Demand AnalysisActivities

Customer demand analysis

Claims & lapse analysis

Observations & awareness 

Key client insights / surveys 0.0%

5.0%

10.0%

15.0%

1 2 3 4 5 6 7 8 9 10 11 12 13

36%64%

Ref. Demand Category  %1 I would like to change my details 11.9%2 I am following up on a request or claim 10.3%3 I'm having X done under X extras, what will I be covered for? 8.1%4 I am going to hospital to have X procedure, what will I be covered for? 8.1%5 I would like to know what is covered under my policy 7.0%6 I don't understand the correspondence I've been sent from nib 5.7%7 Can I please have X? 5.4%8 I would like to change my policy coverage 5.4%9 I want to cancel my policy 5.1%10 I would like to make a claim 4.6%11 I would like a quote on X 3.8%12 I would like to speak to X person / internal department 2.7%13 I want to make a payment 2.4%

Total 80%

Demand analysis

Value

Failure

36% of calls through the retail service channel represent failure demand36% of calls through the retail service channel represent failure demand

Failure demand is created by some form of organisation defect

Failure demand is primarily driven by ‘chase’ calls and confusion relating to correspondence

Based on our findings we are going to start with three key areas for improvement…

35

Call centre failure demand driven by claims progress checks – ~30k calls p.a.

Variation in processing lead times and customer experience

Accumulation of backlogs on a weekly and monthly cycle, driving overtime expenses

Call centre failure demand driven by confusion from the on‐boarding process and documentation ‐ ~36k calls p.a.

High lapse rate in first 6 months has a significant financial impact

High lapse rate for ‘new to PHI’ customers at month 2 

Customers who complain / escalate are far more likely to be disloyal (retention)

Typically only 4% of customers who experience an issue    actually complain*

Opportunity to enhance the existing complaints framework by completing the PDCA cycle – a systematic approach to problem solving

Rationale for selection Activities

Throughput times

Manual claims related failure demand

Overtime expenses

Claims provisioning

Lapse rate (first 6 months)

On‐boarding customer experience

Complexity in correspondence

Call centre failure demand

Management expenses

Complaints

Escalations

NPS and customer satisfaction

Initial Target outcomes

Customer demand analysis

Claims & lapse analysis

Observations & awareness 

Key client insights / surveys

ManualAncillary Claims

On‐boarding

Complaints

2

3

1

*Source: 2008 Corporate Executive Board figures

Questions

Information Technology

Brendan Mills – Chief Information Officer

IT strategy

MISSIONSupport the achievement of our business strategy and improve performance across business operations through the application of 

technology

Core business processes meet user 

requirements, are cost efficient and flexible to meet evolving business and customer needs

Customer engagement, relationship 

management and service is world class

Management information and 

systems are secure, accessible, reliable and help us make better 

decisions

38

Technology delivering efficiencies

Technology continues to delivery operational and claim efficiencies:• Straight through processing (STP) accounts for more 80% of ancillary claims processed (less

than 15% of ancillary claims processed manually, ~5% auto capture)• Approximately 70% of medical claims (specialists, etc) processed by STP (FY10: less than

50%. Manual processing approximately 20% (FY10: 20%), with auto capture approximately 10% (FY10: 30%)

• Approximately 20% of hospital claims processed by STP (FY10: nil). Manual processing approximately 50% (FY10: 80%), auto capture 30% (FY10: 20%)

39

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Jul-1

0

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb-

11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

Aug

-11

Sep

-11

Oct

-11

Nov

-11

Dec

-11

Jan-

12

Feb-

12

Mar

-12

Apr

-12

May

-12

Perc

enta

ge

Overall (Ancillary, Medical, Hospital) claiming rates

STP

Auto-Capture

Manual

IT spend as a percentage of revenue FY11

IT spend relative to the market

1.6%

3.1%3.5%

0%

2%

4%

nib

Gartner (Insurance Global)

Gartner (Global)

IT investment currently lower than market comparisons (Gartner):• Represents a “cash out” basis • Significant growth year on year in capex spend• Looking to continue to make significant capex investments offset by opex savings • IT opex likely to grow or at least maintain current spend levels to support technology

capabilities• FY13 likely to be significant in capex given Mobile, Online and Knowledge Management

development

40

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 the overall maturity model

41

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

42

* TLC is nib’s quality improvement initiative which we have called Think Like the Customer or TLC

Questions

International Business

Matt Henderson

International workers business

45

IWB = 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

China Post Grad students emigrating

University education networks, online, blogs, Google search Value/cost

IndiaEmigrating for work – own choice or transfer, predominantly IT industry

Multinational companies HR, recruitment agencies, trade expos,provider reputation (family/friends already here)

Ensuring visa compliance, credibility, value/cost, reliable brand

United States Experienced professional

Relationships via International employers/networks, recommendations from employers/colleagues, professional networks, comparison websites

Competitive value and proposition (USP)

United KingdomWork – medical industry, corporates transferred and headhunted

Employers and recruiters, online search, word of mouth, social media

Quick response, grudge purchase (reciprocal health care agreement), tailored for 457 visa

Australia (non 457 visa holders)

Transitioning from other sub class (backpackers/travelling), seeking work

Networks built here, online search, word of mouth, social media

Product benefits, service,competitive value, reputable brand

International students business

46

Strategic Plan FY13-15 Persevere with International students subject to improved commercial performance and/or

success with the sponsored Middle East market

Sponsored international scholarships 

Offshore alliances

Education agents

Retail online sales

Distribution channels by size of opportunity

Market outlook

DIAC is forecasting NOM to “gradually” rise by June 2015, with temporary visitors representing 59% of all visitors

As at March 2012, 457 visa stock of 88,000 is 8,000 above FY12 DIAC forecast. Based on this, a 20.6% growth projection in FY13 is still conservative.

Increase in volume of the retiring workforce (baby boomers) is contributing to the demand for migrant workers in outer years.

Students are expected to slightly recover based on re-establishing balance between arrivals and departures and benefits of the Knight Review, including extending the length of stay for students post study

47

0

50

100

150

200

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Pers

ons

('000

)Contribution of temporary immigrants to NOM

TouristsWorking holiday makersSubclass 457Students

Final and Preliminary Forecasts and Projections

Source: DIAC The Outlook for Net Overseas Migration March 2012NOM: Net Overseas MigrationNote: The contribution of the subclass 457 (Long Stay Business) visa and that of Working Holiday visa to NOM decreased recently due to the economic slowdown, but is starting to grow again as the economic recovery continues supported by high terms of mining trade, and the unemployment rate stabilising.

New Zealand

48

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

Source: OECD Health Data 2011, June 2011

1. In the Netherlands, it is not possible to distinguish clearly the public and private share for the part of health expenditures related to investments. 2. Total expenditure excluding investments.

Other International opportunities

International Private Medical Insurance (IPMI) for global expats

Alliances with international brokers and managing agents

Medical tourism Indian/Australian opportunities

49

Questions

Finance & Outlook

Michelle McPherson

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 impacted by lower capital base due to capital return ($75.4m), FY11 special dividend ($23.3m) and on market share buy back (FY12: $41m)

Forecast FY12 EPS slightly up on FY11(13.7cps) Further significant capital management unlikely in FY13 as we await

new PHIAC capital standards (expected shortly) and assess actual impact

Consideration of FY12 special dividend subject to franking credits and no clear and present strategic investment opportunities

52

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 a shift in sales mix by distribution channel

Lapse rate up to 9.4%* annualised (FY11: 9.0%)

53

* 11 month result to 31 May 2012

% of total sales Call centre Web Broker Retail Corporate Other

FY11 36 33 11 13 8 0

FY12F 30 28 23 11 7 1

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 day)

To date approximately 15,000 policyholders have elected to prepay, representing approximately $50m in premiums prepaid

Advising customers to pre-pay before 30 June 2012 Expected impact of prepayment:

• Potential reduction in FY13 lapse• Increase in FY13 net investment income• Potential reduction in FY13 HIB net underwriting profit due to 2013

price increase being rate protected if we are unable to price in additional rate protection impact

54

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

presentation (approximately $7m)• Additional $1m approximately in 2H12 due to restructure costs

not previously forecast

55

2H12 HIB operating environment challenging as expected

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 importance of technology• Help align operating cost structure with profitability

targets Expected to result in ongoing annual savings in the

order of $1.2m (from FY13)

56

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) and business remaining sub-scale

57

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 AASB1023 rather than expense as incurred which has been our historic practice given amounts have been previously not been viewed as material.

This potential change would see an increase in reported profit

Work is currently underway to finalise nib’s position and determine financial impact

58

Questions

nib 2012 strategy briefing

Monday 25 June 2012