The devastation of COVID-19 made FY20 as extraordinary as any I’ve ever encountered in my executive and non-executive director corporate career. While secondary to the tragedy of widespread death and suffering, the pandemic has devastated consumer confidence and destroyed or put at risk, so many businesses.
chairman's report
As you would expect, the Board is acutely aware of the challenges COVID-19 presents the nib Group and very focused upon supporting our members, travellers, employees and business sustainability. The commercial challenges are many and include maintaining growth in difficult market conditions, forecasting and managing claims experience in unpredictable circumstances as well as ensuring the nib Group remains well capitalised and ready to meet a range of possible future scenarios.
Despite the disruption of COVID-19, FY20 was another year of good progress in fulfilling our purpose of “Your Better Health”.
We funded over 350,000 hospital admissions and almost 3.6 million dental, optical and other ancillary visits. We took a giant stride in our ambitions to make our value proposition for members and travellers as much about healthcare “prevention” as it is “cure” with the creation of Honeysuckle Health. In partnership with global healthcare company Cigna, Honeysuckle Health will deliver data science led insight and guidance for a more personalised approach to disease prevention, management and treatment.
Complementing nib’s direct efforts, our nib foundation contributed $2.1 million towards various initiatives consistent with its charter of supporting the health and wellbeing of the communities we serve. This included $1 million to help fund programs over the next four years specifically focussed on ‘closing the gap’ in health outcomes for Aboriginal and Torres Strait Islander peoples. We very much see community health and wellbeing as the centre piece of our sustainability agenda.
Our commercial results for FY20 were somewhat “mixed” with COVID-19 a key factor.
Pleasingly, Group revenue grew 3.4% to $2.5 billion with our flagship Australian Residents Health Insurance (arhi) business increasing policyholders by 1.9% to now cover almost 1.2 million people, in an overall market that grew just 0.4%. Similarly, New Zealand performed well growing its revenue by 11.4% and policyholders 7.4% to cover more than 225,000 people.
Unfortunately, restrictions on foreign entry into Australia severely impacted our international students and workers (iihi) business while the global impacts of COVID-19 caused significant disruption to our nib Travel operations.
We experienced a decline in operating margins compared to the previous financial year across all segments although, other than for travel, they remain solid and generated a return on invested capital of 11.2% for the Group.
Our Managing Director expands upon the FY20 results further on. It is worth me observing here, that while acknowledging macroeconomic stress, the Board has every confidence in the Group strategy, outlook and underlying commercial performance. The reduction in statutory earnings per share (EPS) to 19.8 cents per share (down 40.0%) wasn’t welcomed and there are clearly hurdles across the Group, most notably nib Travel which is operating in a very difficult market. Yet FY20 was a year of multiple COVID-19 related distortions and not an accurate reflection of underlying performance of the nib Group.
We especially believe the company has so far navigated the difficulties of COVID-19 well. We’ve taken a wide range of initiatives to protect and support our members, travellers, employees and general community. I encourage shareholders to read our 2020 Sustainability Report available at nib.com.au/shareholders.
While in no way celebrating the misery of COVID-19, we also see opportunity. The pandemic has clearly heightened throughout the community the risk of disease and the need for protection. It has accelerated our plans
to better predict disease risk amongst our members and prevent or better manage those risks. It is causing us to move even faster with investment in digital health and how we service members and travellers.
We have decided to make a final dividend of 4.0 cents per share, fully franked bringing the full year dividend to 14.0 cents per share, representing 71% of net pro t after tax. In making the final distribution we have been cognisant of the need to balance a return to our shareholders with regulatory guidance and maintaining a strong capital position in a COVID-19 context.
As shareholders expect, succession planning and ensuring we have the right skills mix, diversity and experience on our Board and in our senior management ranks remains a priority for the Board. As part of nib’s succession planning Non-Executive Director, Christine McLoughlin announced she will retire from the Board in September this year.
Christine is one of Australia’s most respected and astute company Directors, and nib has been fortunate to have her serve on our Board for almost 10 years. She has made a wonderful contribution to nib’s growth and success during this time especially as Chair Risk and Reputation Committee. I would like to thank her for her passion, insights and leadership at nib over almost a decade. In parallel, we welcome David Gordon who joined the Board in May 2020.
I would like to thank my Board colleagues for their leadership and contribution during FY20. And of course, I want to thank our Executive management team and all of our people for what the Board believes was exemplary performance in extremely difficult conditions.
Steve Crane
Chairman