2022
Annual
Report
CELEBRATING 70 YEARS
Table of Contents
Our Purpose, Vision, Business Strategy
Sustainability
Operating and Financial Review
Directors’ Report
Auditor’s Independence Declaration
Remuneration Report
Corporate Governance Statement
Financial Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the Members
Shareholder Information
Corporate Directory
nib holdings limited
ABN 51 125 633 856
1
2
3
14
21
22
45
46
47
48
49
50
51
52
121
122
128
133
Group Performance Highlights
Total underlying
revenue
$m
7.2%
Underlying
operating profit
$m
14.8%
Net investment
income
$m
157.9%
Net profit
after tax
$m
16.6%
2,235.1
2,421.6
2,503.2
2,576.7
2,761.3
184.8
201.8
146.9
204.9
235.3
29.6
36.1
16.6
51.8
(30.0)
133.5
149.3
87.0
160.5
133.8
FY18
FY19
FY20
FY21
FY22
FY18
FY19
FY20
FY21
FY22
FY18
FY19
FY20
FY21
FY22
FY18
FY19
FY20
FY21
FY22
Statutory EPS
cps
Dividends
cps
15.9%
8.3%
29.4
32.9
19.3
35.2
29.6
20.0
23.0
14.0
24.0
22.0
Return on invested
capital1
%
19.5
19.1
19.1
11.2
440
bps
Group NPS
4
14.7
29
32
35
27
31
FY18
FY19
FY20
FY21
FY22
FY18
FY19
FY20
FY21
FY22
FY18
FY19
FY20
FY21
FY22
FY18
FY19
FY20
FY21
FY22
1 ROIC calculated using average shareholders’ equity including non-controlling interests and average interest-bearing debt over a rolling 12 month period.
Our Purpose
Your better health and wellbeing
• Deliver deep insight and guidance about how to best achieve personal health and wellbeing goals and manage risk.
• Connect with a wide ecosystem of relevant health and wellbeing services, programs and providers.
• Make it all accessible and affordable with insurance and other related financial protection and support.
Vision
nib is widely recognised and acknowledged as a company concerned with the health and wellbeing of its members and travellers.
They choose nib because they believe we will help them maintain good health and stay well. And that nib provides them with relevant
and effective insurance and financial support.
Their confidence in nib draws upon our demonstrated capability in applying advanced data science and predictive analytics to
better understand how individual health and wellbeing goals can be achieved. The idea of “personalising” health and wellbeing and
preventing disease differentiates nib in the market as we eschew a “one size fits all” approach.
We guide and connect members and travellers with a wide network of healthcare service, product and support providers concerned
with both prevention and treatment. Connection may be physical, virtual or digital depending upon personal needs, preferences and
circumstances. We assist “informed choice” of providers through performance data and transparency.
Deep insight into disease risk and ready connectivity also supports healthcare providers in meeting the needs of their patients and clients.
Our technology especially makes for a more comprehensive, integrated and continuous approach to management and care. It also allows
providers to monitor, diagnose and treat patients within more clinically appropriate and efficient settings of care including patients’ homes.
Managing health and wellbeing, as well as accessing providers, is made more possible and affordable by health and travel insurance
as well as through other adjacent financial products.
Members and travellers have options in how they contact and engage with nib. Service quality as it relates to timeliness,
effectiveness, and satisfaction is high.
Our commitment to health and wellbeing of entire communities, and success in delivering tangible improvements highlights our efforts
in meeting our “social contract”.
Business Strategy
We apply data science and predictive analytics in developing deep insight into the health risk of individuals and how it may be best
managed, as well as equip them with integrated digital tools for seamless engagement with us and the healthcare system (personalisation).
This insight and engagement becomes our core capability and competitive advantage. Consistent with our purpose it helps our
members and travellers achieve their health and wellbeing goals and improve outcomes:
With that we are able to:
PHI expansion
Expand our value proposition and differentiate nib in existing private health insurance (PHI) markets by making membership
as much about supporting good health as it is the treatment of sickness and injury. We grow the PHI market and our share.
New markets
Enter and grow new markets with a non-PHI membership as well as offering treatment packages and health programs
specific to a wide range of conditions. We differentiate and grow our travel business and pursue NDIS opportunities.
Cost containment and affordability
Better contain healthcare treatment and claims cost inflation through more precise and effective disease prevention and
management. Containment which is then passed through to members and travellers in the form of more competitive
premiums and/or improved service and benefits.
Revenue and value capture
Capture revenue and economic value from existing healthcare providers through Honeysuckle Health and its wide range
of health risk management products and services.
Government and 3rd party programs
Aspire to manage healthcare and improve outcomes within discrete populations on behalf of Government and other
healthcare payers.
In pursuit of these goals, we continue to develop organisational, talent and advanced technological capability across the Group
(organisational capability).
Annual Report 2022 1
Sustainability
Our purpose is the “better health and wellbeing” of the people and communities we serve. In pursuit, we are investing in a more cost
effective, sustainable and fairer healthcare system.
We also recognise the influence of a wide range of social, economic and environmental factors and the role we can play, however
modest, in aligning these with our purpose. They include a sense of acceptance and inclusion, meaningful employment and economic
security as well as a clean and sustainable natural environment.
Our vision is to have a meaningful role in improving healthcare outcomes for people and their communities, especially in reducing
gaps in access to care and outcomes within disadvantaged communities.
Our FY22 highlights include:
Assisted ~10,000 members to stay healthy
through our health management programs including almost 1,000
Māori rōpū (Māori group) members
Launched a health check (health risk assessment) and
associated good health plan to help improve health outcomes
for members
Delivered all outcomes of our Reflect Reconciliation
Action Plan
50% of our brand partnership and community sponsorship portfolio
advocated for equality and diversity
Almost 500,000 people reached via nib foundation’s Prevention
Partnerships with a focus on chronic disease risk reduction
Attained Climate Active Carbon Neutral certification
for the first time
$2.3 million in community funding including 26 charities
supported by nib foundation
Developed science-based targets to achieve
net carbon zero by 2040
Achieved 40/40/20 gender representation
across our managers, team leaders, heads of business units,
Attainment of ISO 27001 certification
for cybersecurity processes
Executive and Board
2 Annual Report 2022
Operating and Financial Review
for the year ended 30 June 2022
Chairman’s Report
This year marks nib’s 70th year of meeting the needs of our
members for health insurance and access to healthcare services.
Founded by a relatively small group of steel workers deep
inside BHP in Newcastle, the company today covers more than
1.7 million1 people across Australia and New Zealand, and offers
travel insurance worldwide. It’s a remarkable story of growth
and success.
In terms of performance, it’s almost impossible to discuss FY22
without further commentary on COVID-19 and its variants.
Apart from the havoc it’s caused society and marketplaces in
general, the pandemic has had very material consequences
across the nib Group, which Mark will cover in his report.
It has required a level of agility above any the company has
encountered in its 70-year history. That we are emerging in
such a strong position is an enormous credit to everyone at nib.
Most importantly, FY22 was full of highlights in fulfilling our
purpose of ‘your better health and wellbeing’. We added more
than 20,000 members in our core Australian Residents Health
Insurance business, at a growth rate of 3.2%, well ahead of the
anticipated industry average. We provide access to the best
possible care for our members, and in FY22 paid $1.8 billion
in claims2, related to over 300,000 hospitalisations and more
than 3.5 million allied treatments such as dental and optical.
Importantly, we enrolled over 7,000 arhi members in health
management programs relevant to their disease or medical
condition with strong evidence of improved health outcomes.
Our experience in New Zealand was similarly positive. We added
over 6,000 members to our private health insurance book, at a
growth rate of 5.6%, and incorporated life and living insurance
within our product offerings through nib nz insurance limited
(previously Kiwi Insurance Limited, acquired on 29 April 2022).
Our life and living products include life, serious illness trauma
and income protection insurance.
Our international workers business also had a very positive
year with an increase in seasonal workers arriving in Australia.
COVID-19 and border closures seriously disrupted demand and
activity in our student and travel businesses. Nevertheless, both
are rapidly recovering as activity returns.
Group operating revenue and profitability were particularly strong
against that backdrop. Year on year, the strong performance
overall delivered a 14.8% increase in our underlying operating
profit to $235.3 million. Unfortunately, a good part of that uplift
was offset by $30.0 million of reported losses on investment
income, a negative swing factor of $81.8 million against an
investment income gain of $51.8 million the previous year.
It meant our earnings of 29.6 cents per share was below that of
FY21. The Board has determined a final dividend of 11.0 cents
per share, bringing the full year dividend to 22.0 cents per share
fully franked. The full year dividend, representing an earnings
payout ratio of 74.4%, is slightly higher than our target but
reasonable under the circumstances.
1. Persons covered. Includes life and living.
2. arhi net claims incurred.
Your Board of Directors and I are very excited about our
ambitions for nib and its prospects. As Mark describes, we see a
larger place for nib in the future of healthcare. nib will be as much
about keeping our members and travellers disease and injury free
as it has and will be about helping them through their sickness
and injury. Much of this vision relies upon efforts and investments
we’re making in data science and predictive analytics. There’s no
better example than Honeysuckle Health, our joint venture with
global health services company, Cigna Corporation.
This same focus is at the heart of our approach to meeting our
environmental, social and governance obligations. For example,
we’re already carbon neutral with a commitment and roadmap
to be net zero carbon by 2040. Our Ngāti Whātua Ōrākei
partnership aims to improve the health and wellbeing outcomes
for the Auckland hapū (Māori sub tribe). It continues to grow and
now includes a screening service for heart disease, a program
tailored to the needs of the hapū. And nib’s inaugural Reflect
Reconciliation Action Plan, which included a commitment to
building the cultural capability of our workforce, was completed.
A key focus has been nib employees learning about the health
disparities experienced by First Nations people.
nib proudly celebrates its 70th year as we remain true to our
purpose of improving access to healthcare and providing better
health outcomes throughout the community at large, including all
First Nations people in Australia and New Zealand. It is here that
we see our greatest potential for meaningful impact.
David Gordon
Annual Report 2022 3
Another important development has been our shift to hybrid
working. I believe we’ve experienced a page-turning moment in
organisational theory, and today, piling our people into an office
five days a week is no longer the norm. Rather – and subject to
meeting technology and health and safety requirements – about
1,350 people work from wherever they choose – and for many
that is from home. We acknowledge the importance of regular
social contact, and we know that for some, home isn’t an option.
Nevertheless, across a much-reduced office footprint, we’re
only requiring people to come into their hub when warranted,
including for training, coaching, business planning, brain
storming, project coordination and celebration.
I’m as excited as ever before about the future and the company’s
prospects. As a society our spending upon healthcare continues
to accelerate, limitations on government funding mean we need
even more private sector involvement and there are so many
opportunities beyond our traditional role as a health insurer.
I easily imagine a near-term where our members, travellers,
employees and all stakeholders, including shareholders, view us
as preoccupied with improving people’s health and wellbeing.
They see that being “purpose-led” aligns with powerful
commercial performance.
Mark Fitzgibbon
Operating and Financial Review
Managing Director’s Report
As David has mentioned, it’s been another extraordinary
year with the COVID-19 pandemic affecting every part of our
business. Of greatest financial consequence has been the
significant reduction in hospital and healthcare treatment and
thus our claims experience, and that of the entire private health
insurance industry. It’s resulted in short-term increases in
operating profitability. Our reported underlying operating profit of
$235.3 million was 14.8% ahead of FY21, with Group underlying
revenue of $2.8 billion up 7.2%.
Our higher level of profitability partially reflects deferred or
foregone healthcare treatment. Members postponed or found it
difficult to access hospital and other healthcare services through
the COVID-19 pandemic. We have pre-emptively returned
savings to members in a range of ways, and made provisions
in our financial accounts for much of the deferred treatment,
expecting catch-up at some future time.
To date, we have provided premium deferrals, premium credits,
expanded COVID-19 treatment cover, and additional benefits
at no extra cost to members. We have valued our full pandemic
support package at $100 million and we expect further measures
once the position becomes clearer and the pandemic is
behind us.
Increased profitability has helped offset several negative impacts.
Our previously profitable international students health insurance
and travel insurance businesses both incurred material losses in
FY22, compounding losses made in FY21. And although direct
COVID-19 attribution is problematic, we booked a significant loss
in our investment returns, which David has already highlighted.
This is disappointing, yet we assume it will bounce back in the
future, even if the near term macro-economic outlook seems a
little uncertain.
As David mentioned, we are fundamentally attempting to
become as much a health management company as we are
a health insurance company. Nobody celebrates the misery
and disruption of COVID-19, but the pandemic has led to
an increased awareness in the community of the risk of
disease and the need for active health management. More
people acknowledge the advantageous nature of healthcare
technologies, which are more compelling than ever before.
The pandemic has driven efficiency improvements, including the
gravitation to home-based care. Virtual consultations and digital
treatment are germane to the way we can deliver care.
4 Annual Report 2022
for the year ended 30 June 2022
nib Group
$2.8b
total Group
revenue
up 7.2%
$133.8m
NPAT
$235.3m
Group UOP
down 16.6%
up 14.8%
29.6cps
statutory EPS
down 15.9%
$(30.0)m
net investment
income
22.0cps
full year
dividend
down 157.9%
down 8.3%
nib this year reflects on its 70th-anniversary while acknowledging
the challenges and hardships the COVID-19 pandemic has again
imposed on members, travellers, employees, communities and
businesses in Australia and overseas.
nib Group reported an underlying operating profit (UOP) of
$235.3 million compared with $204.9 million last year. Group
revenue of $2.8 billion (up 7.2%) benefited from policyholder
growth across the Australian residents, international workers and
New Zealand businesses.
Our Australian Residents Health Insurance (arhi) showed strong
momentum in Q4. Policyholder numbers rose 3.2% and premium
revenue also showed strong growth.
Pleasingly, International Inbound Health Insurance (iihi) and nib
Travel are showing signs of recovery after a period of significant
disruption caused by the closure of international borders. Both
businesses returned to profitability in the second half of the year.
FY22 premium revenue in nib’s iihi business was at its highest
level ever, with the mix of policyholders – shifting more towards
workers than students – contributing to a strong rebound in
performance in 2H22.
There was a strong recovery in sales volumes in Q4 for nib travel
leading to a return to profitability for 2H22 and a reduction in
the full year loss to $7.4 million. Pleasingly, in Q4 gross written
premium reached 103% of pre-COVID volume.
Group claims expense remained subdued given the ongoing
impacts of the pandemic with new COVID-19 variants Delta and
Omicron and supply chain limitations.
The Group deferred claims liability (DCL) provision was increased
to $110.2 million (FY21 $34.0 million), as members continued
to delay treatment as a result of the pandemic. The DCL is now
recognised in the arhi business only.
As the pandemic has continued to evolve, so has the support
nib is providing to members, travellers and the community.
nib is proactively returning savings and increasing benefits to
members in a variety of ways, including deferrals in premium
increases, premium credits, expanded cover for COVID-19
related treatment and additional benefits at no extra cost.
nib announced a further $55 million in FY22, bringing the total
package to $100 million.
Many of nib’s employees worldwide continue to work from home.
nib’s shift to hybrid working means about 1,350 people can
decide when to come into their hub, or work from elsewhere.
In a further acknowledgement that nib encourages and supports
diversity in its workplace, the nib Group introduced a wide range
of benefits for employees including better parental and more
flexible cultural leave options.
nib has also continued to invest in our key Payer to Partner
(P2P) strategy and technology platforms to underpin innovation
across all of our businesses. Underlying underwriting expenses
increased 14.9% due to investment in P2P as well as marketing,
increased commission costs and increases in IT expenditure,
partly reflecting growth in policyholder numbers.
Net profit after tax (NPAT) was $133.8 million (FY21
$160.5 million). Net investment income resulted in a loss of
$30.0 million (FY21 gain of $51.8 million). The loss reflected
volatile market conditions around the globe. Inflationary
pressures, rising interest rates here and abroad, and economic
uncertainty in the world’s largest economies resulted in market
losses and lower returns on Australian Government bonds,
global shares, Australian shares and global listed property funds.
Statutory earnings per share was down 15.9% to 29.6 cents per
share due to the $81.8 million negative turnaround in investment
income and was only partially offset by higher Group UOP.
The Board declared a final dividend of 11.0 cents per share
fully franked, resulting in a full year dividend of 22.0 cents
per share (FY21 24.0 cps). The full year dividend represents a
payout ratio of 74.4% of FY22 NPAT. The final dividend has a
record date of 6 September and will be paid to shareholders on
4 October 2022. The Dividend Reinvestment Plan is available to
eligible shareholders.
Overall, the Group remains in a strong capital position with
$82.4 million in available capital above internal targets after
allowing for payment of the final dividend. APRA released draft
capital standards in December 2021. It is anticipated these
standards will be finalised during the second half of calendar
year 2022 for implementation by 1 July 2023. nib is well
progressed for this implementation and will be revising internal
benchmarks and reporting when final standards are released.
nib anticipates fulfilling its purpose of ‘your better health and
wellbeing’. To that end, it welcomed news that Honeysuckle
Health passed the final hurdle to become Australia’s only ACCC-
authorised buying group for healthcare payers. In July 2022, nib
completed a funding round with Midnight Health, and is now the
majority shareholder with equity of 63.14%.
nib continues to explore its ambition to enter the NDIS plan
management sector. We believe we can leverage our 70-year
heritage and strong track record to connect buyers and sellers
of healthcare services. Our vision is for best of breed core
technology, and the delivery on our purpose of your better
health and wellbeing.
Annual Report 2022 5
Operating and Financial Review
Australian residents health insurance (arhi)
$2.3b
premium
revenue
up 5.2%
$240.5m
UOP
up 12.3%
3.2%
net
policyholder
growth
30
net
promoter
score
up 5
nib’s arhi business reported an underlying operating profit of
$240.5 million, up 12.3% as a result of strong top line growth
and lower claims experience.
Premium revenue was up 5.2% to $2,286.2 million driven by net
policyholder growth of 3.2%, prior year pricing adjustments and
lower downgrading. Our policyholder growth rate for FY22 is
above the anticipated industry average and 4Q22 was nib’s best
quarterly net growth in 7 years (adjusting for impact of COVID
resumptions in prior periods).
Improvements in lapse and strong sales performance in our
GU Health and whitelabel brands offset lower performance in
direct-to-consumer channel sales throughout the year.
During the COVID-19 pandemic, many members found it difficult
to access hospital services and other healthcare treatment.
As part of nib’s COVID-19 member support package, our
expected 1 April 2022 price increase was deferred for seven
months. Other support provided during the year included
expanded cover for COVID-19 related treatment and additional
benefits (including psychology Extras benefits) at no extra cost
to members. Estimating actual savings remains challenging with
a need to understand how much treatment has been lost as
opposed to deferred. We will continue to monitor the position
and consider if further support is warranted.
Claims experience has continued to be favourable due to
the ongoing impacts of COVID-19. Hospital claims remained
below expected levels, with healthcare services restricted
and policyholders continuing a general reluctance to seek out
healthcare. Reduced industry claiming also resulted in lower
risk equalisation. The favourable claims experience was partially
offset by claims inflation and an increase in the deferred claims
liability to $110.2 million.
The increase in management expenses was driven by investment
in marketing and Payer to Partner strategic initiatives, as well
as higher commissions from increased policy sales. This was
partially offset by a reassessment of the methodology to allocate
shared service costs.
Net margin remains high due to strong growth and the favourable
claims environment. However, this is expected to return to our
target range of 6-7% over time.
arhi’s net promoter score improved to 30 with the previous year
impacted by multiple price increases in the period due to the
deferral of the April 2020 price increase.
nib’s strategic partnership with Honeysuckle Health saw the
launch of the GapSure Anaesthetics Network, the launch of
at home physical therapy services, and an online health risk
assessment tool. nib and Honeysuckle Health believe the use
of predictive analytics and data science will help deliver better
health and wellbeing to members.
6 Annual Report 2022
for the year ended 30 June 2022 International (inbound) health insurance (iihi)
$123.7m
premium
revenue
up 7.1%
$(1.1)m
UOP
loss decreased
81.4%
(4.8)%
net
policyholder
growth
43 | 47
NPS
iwhi | ishi
up 7 | up 2
The performance of our iihi segment continues to reflect
very different market conditions for the international workers
and international students businesses. iihi premium revenue
increased 7.1%, to a record high of $123.7 million, as a result
of a strong performance in the international workers business.
However, impacts of COVID-19 continued to be felt in the
international student market. Policyholders were down 4.8% due
to a decline in the students business.
The international workers business benefited from high growth in
seasonal workers arriving in Australia. A shift in mix towards the
workers business increased average revenue per member.
Student numbers were down despite the re-opening of
international borders and easing of COVID lockdown restrictions
in major cities. Many students chose to remain offshore when
universities responded to the new COVID-19 variants Delta and
Omicron by shutting many campus activities. However positive
signs are emerging with a sharp increase in student visas lodged
in 2H22 and the number of primary offshore visas lodged in June
at record highs1.
Large claims volatility impacted the international students
business, however the underlying claims experience continues to
show signs of easing as international travel returns to normal and
students return home for treatment. A shift in mix towards the
workers business increased average revenue per member and
improved gross margins.
Net promoter scores of 43 for international workers and 47 for
international students has improved on FY21 (iwhi: 36, ishi: 45)
driven by ongoing improvements in our digital service experience
including digital chat and point of service claiming.
We continued to provide support for our international members
throughout the pandemic. In response to a rise in the number
of students facing mental health issues during the COVID-19
pandemic, nib partnered with batyr to fund the batyr@uni
program, which creates a link between students and mental
health and wellbeing services. Through our nib foundation,
we supported more than 2,200 students.
1. Source: https://data.gov.au/data/dataset/student-visas Data dating back to July 2005.
Annual Report 2022 7
Operating and Financial Review
New Zealand
$291.8m
premium
revenue
up 12.8%
$22.7m
UOP
down 5.8%
5.6%
net PHI
policyholder
growth
34
net
promoter
score
nib New Zealand delivered another strong result reporting a
UOP of $22.7 million, after a year of strong premium growth.
Premium revenue was up 12.8% to $291.8 million, driven by
net policyholder growth, premium adjustments and favourable
foreign exchange impacts.
Private health insurance policyholders grew 5.6% (net), with
strong performance across the corporate group, advisor and
whitelabel channels. Travel restrictions imposed as a result of
COVID-19 resulted in a sharp reduction in international students,
with policyholder numbers down 43.9%. The acquisition of the life
and living insurance business added over 30,000 policyholders.
Claims increased 8.7% as a result of policyholder growth and
claims inflation. Utilisation was up 5.2%.
The business experienced lower claiming rates due to the
pandemic and some claims catch up is expected in FY23.
A deferred claims liability (DCL) has not been utilised in NZ
(given differing circumstances to Australia), and a temporary
increase in the outstanding claims (OSC) risk margin
($4.9 million) is warranted to allow for the greater uncertainty
around COVID-19 claims which had previously been addressed
through the DCL. Specifically, the company has less risk appetite
for the OSC to be understated given these pandemic risks. This
also impacted the Liability Adequacy Test requiring a partial
write-off of deferred acquisition costs of $4.7 million.
The increase in management expenses reflects higher
commission costs as a result of higher sales, investment in
process re-engineering and technology platforms to support
future growth and operational efficiencies as well as increased
support for members, population health and partnerships.
Management expenses also includes the partial write-off of
deferred acquisition costs as noted previously.
New Zealand has continued its population health partnership
with Auckland hapū (Māori sub tribe), Ngāti Whātua Ōrākei.
This initiative has been expanded to include another iwi
(Māori tribe), Ngati Porou, starting with their employees.
These partnerships aim to break barriers that the Māori
population face in the public healthcare system such as cost,
choice, waiting times and accessibility. nib’s community health
partnerships are focused on programs tailored to help members
reduce the risk of disease, and proactively manage their health
and wellness.
During the period, a new Wellington hub was opened for nib nz
insurance limited1. Sales of life and living products began in May,
generating $0.1 million in UOP.
Our net promoter score remained strong at 34 reflecting
continuing improvements in the way we help our members.
1. nib nz insurance limited (previously Kiwi Insurance Limited, acquired on 29 April 2022). Our life and living products include life, serious illness trauma and income protection illness insurance.
8 Annual Report 2022
for the year ended 30 June 2022 nib Travel
$98.8m
GWP
up 481.2%
$(7.4)m
UOP
loss decreased
45.6%
155.3%
policy
sales
growth
52
net
promoter
score
down 6
The easing of global COVID-19 travel restrictions resulted in a
return to profitability for nib Travel in 2H22, following losses in
1H22. While the business made an overall underlying operating
loss of $7.4 million for FY22, gross written premium (GWP) grew
by 481.2% to $98.8 million and operating income increased by
232.9% to $46.6 million, over the same period last year.
FY22 was also a year that nib Travel continued its focus on
costs, with operating expenses (excluding commissions and
marketing) rising 16.5% to $26.9 million. Costs remained well
under pre-pandemic levels, and low relative to growth in revenue.
Acquisition costs increased due to the rise in sales reflected in
increased marketing and commissions.
The numbers reflect the special circumstances that arose
during the COVID-19 lockdowns, with the business facing
major disruption when borders closed. There has been a strong
recovery in Q4, with GWP at 103% of pre-pandemic volumes:
domestic and international segment GWP recovered to 132%
and 65% of pre-pandemic volumes respectively. These increases
encompassed direct and partnership channels. Demand was
driven by product positioning, with nib Travel including some
cover for COVID-19 in policies, and a pick up in customer
interest in travel insurance.
A net promoter score of 52 was maintained despite significant
business impacts from the pandemic, showing high levels of
customer satisfaction.
Annual Report 2022 9
Operating and Financial Review
Principal Risks and Uncertainties
nib has established policies and systems for the oversight and management of material business risks. Further information regarding
how nib recognises and manages risk is detailed in our Corporate Governance Statement, which is available on our website at
nib.com.au.
nib continues to closely monitor the uncertainty and impacts of COVID-19 on its risk profile. As this uncertainty continues into
FY23, nib will carry on making enhancements to its control systems in order to optimise outcomes related to both financial and
non-financial risks.
The principal risks and uncertainties that could affect nib’s operations, strategies and overall performance are listed in the table below.
Risk description
Insurance risks
Claims inflation and affordability
The risk of rapidly inflated claims costs derived
from health service providers (including hospitals,
ancillary providers and medical specialists). Impacts
could include lower affordability of health insurance
products, weaker financial margins and profitability.
Government policies and regulations
Risks relating to potentially significant and/or
unexpected changes to the regulatory policy settings
and incentives for private health insurance, e.g. risk
equalisation arrangements supporting the community
rating principle, PHI Rebates and Life Time Health
Cover Loading. Financial impacts resulting from this
risk could be either positive or negative.
Risk management strategies
nib has structured management systems for monitoring claims behaviours
and experience, including processes to validate timely and accurate
payment of claims in accordance with policy conditions. A high priority is
placed upon the negotiation, establishment and renewal of key provider
contracts, to ensure acceptable terms, service utilisation rates and
claiming processes are in place.
nib recognises the importance of improving product value and affordability
for Members, resulting in ongoing strategic investments in initiatives
including: development of provider networks to improve price certainty
and value, tools to assist members in making informed financial decisions
and a Payer to Partner (P2P) strategy to target chronic conditions through
Health Management Programs. A strong focus also exists on premium
affordability through the annual pricing submission process. Further details
on claims inflation risk are included in Notes to the Consolidated Financial
Statement 3 a).
nib actively monitors early developments in PHI policy via industry,
media and government circulars, channels and forums. nib is an active
contributor to PHI reforms consultation processes conducted by
regulators including Australian Prudential Regulation Authority (APRA) and
the Department of Health, in order to help shape improved outcomes for
nib members. nib’s risk analysis processes include impact assessment of
potential changes arising from government policy and resulting changes
to products e.g. sustainable premium pricing. nib is represented within
industry forums including Private Healthcare Australia (PHA) and seeks to
work collaboratively with other industry stakeholders to present practical
solutions. As reforms go-live, nib maintains appropriate resources for
external communications (members, strategic partners, media, investor
relations) to ensure effective communication and understanding of
changes to targeted audiences. nib invests in rapid implementation of
initiatives to improve customer value and lower costs e.g. early adoption
of age-based discounts. Further details on risk equalisation are included in
Notes to the Consolidated Financial Statement 3 a).
Pricing risk
A risk of forecasting errors may lead to pricing errors,
caused by key control failures. This may result in
a range of negative outcomes including: impacts
on achievement of nib’s strategic goals, material
financial impact, regulatory issues and/or impacts on
annual pricing approvals.
There are operational controls in place to mitigate risks associated
with pricing and forecasting involving process, people and systems.
In particular, actuarial models are utilised that are based on historical
claims cost and forecasting of claims inflation. Review of pricing
recommendations is undertaken by nib’s Appointed Actuary. COVID-19
has created additional challenges for our pricing processes in Australia
and New Zealand. Further details on pricing risk are included in Notes to
the Consolidated Financial Statement 3 a).
10 Annual Report 2022
for the year ended 30 June 2022 Risk description
Financial risks
Risk management strategies
Investment and capital management
Risks related to the performance of nib’s investment
portfolio, impacting profitability, financial position and
ensuring stakeholder expectations are fulfilled.
nib’s Investment Committee provides oversight of this risk. The Committee
considers the investment strategy and investment risk management
practices, investment performance in order to meet Return on Investment
(ROI) objectives and outlook, and compliance with the investment
component of nib’s Capital Management Plan.
General economic conditions
The environment in which nib operates may
experience challenging conditions as a result of
general uncertainty about future Australian and
international economic conditions.
nib recognises that its performance is impacted by the broader Australian
economic conditions such as inflation, interest rates, exchange rates,
credit markets, consumer and business spending and employment
rates which are outside nib’s control. nib monitors economic conditions
and completes regular stress testing of key variables to validate capital
management planning processes.
Strategic risks
Performance of adjacent (non-Australian
Residents Health Insurance) businesses
nib has diversified its business outside the core
arhi business including International (Inbound)
Health Insurance (iihi), an insurance business in
New Zealand (nib NZ) and nib Travel insurance. The
performance of these adjacent businesses impacts
on nib’s overall operating result and profits.
Operational risks
Business continuity
Risks of events such as natural disasters or a major
failure or inadequacy in information technology
systems may have an adverse impact on nib’s
earnings, assets and reputation.
Cyber security
This risk involves a failure to mitigate/manage a cyber
attack or major security incident. Such an issue
could result in adverse impacts to nib’s members,
disruption to business continuity, non-compliance
with regulations and data standards and negative
reputational effects.
The industry-specific impacts of COVID-19 on nib’s travel and inbound
international health insurance are an example of this risk in practice.
The key risk mitigation strategies for this diversification strategy involve
detailed financial analysis, monitoring and leveraging from establishing
capital management capabilities. Furthermore, compliance with Board
and regulatory capital management requirements within individual
businesses provides mitigation against contagion risks i.e. in the event of
prolonged periods of financial stress impacting the adjacent businesses.
In terms of the latest strategic initiatives, nib is pursuing aligned
transformation opportunities including P2P, digitisation, and enhanced
organisation capability. These risks are controlled by strategic planning
and prioritisation processes that are overseen and approved by the
Board. Adjacent business opportunities involve detailed analysis on risk
opportunities – considering potential upside and downside.
nib invests in highly resilient practices, systems, providers and people.
A business continuity management framework is in place and overseen
by Senior Management and the Board Risk and Reputation Committee.
The COVID-19 pandemic is an example of a significant business continuity
event that has required nib to activate its mitigation strategies to ensure
effective continuity of service.
Similarly, for other notable types of operational risks such as data
management, outsourcing, fraud, people, and health and safety risks,
nib oversees these risks via management, divisional risk committees,
the Management Risk Committee and the Board Risk and Reputation
Committee.
As part of nib’s increased investment and reliance on technology to
conduct an efficient and cost effective business, nib has similarly invested
in a proportionate cyber security controls systems and framework.
nib’s approaches and governance practices for cyber security risks have
been developed in accordance with relevant international technology
standards, taking consideration of applicable industry and regulatory
standards. Oversight is provided by the Management Risk Committee and
the Board Risk and Reputation Committee.
Annual Report 2022 11
Operating and Financial Review
Principal Risks and Uncertainties (continued)
Risk description
Operational risks
Regulatory compliance and legal risks
Risks relating to failure to comply with specific
regulations as part of conducting insurance
businesses and meeting listing requirements of the
ASX. Non-compliance with regulatory requirements
can lead to a range of impacts including financial
penalties, cancellation of authorisations and/or
negative reputational impacts. Legal risk could
involve civil proceedings in courts of various
jurisdictions. nib may also be exposed to litigation in
the future over claims.
Risk management strategies
nib has a structured approach to risk management which includes a
compliance management framework incorporating: compliance strategies
and culture and governance practices. nib’s framework includes systems
and processes for identifying compliance obligations as well as monitoring
and measuring compliance performance. Oversight is provided by
the Management Risk Committee and the Board Risk and Reputation
Committee.
Climate change risk
Each year, environmental, social and governance risks, including climate change, have been considered as part of nib’s Annual Key
Enterprise Risk (KER) review. Due to materiality and time horizon (versus the strategic plan), climate change risk was not determined
to be a KER for our business this year.
nib is publishing its inaugural Task Force on Climate-related Financial Disclosures (TCFD) report in September 2022 in order to clearly
outline our climate risk strategy and to improve disclosure of the financial impacts of climate change on the business. nib’s TCFD
report covers all entities in the Group and will be an annual disclosure.
At nib, climate change risks are managed in accordance with the nib Group risk management framework (RMF) in order to ensure
appropriate ongoing oversight and management. To better comprehend nib’s risk profile and potential opportunities that climate
change presents, nib conducted a climate change scenario analysis in FY19 in accordance with the TCFD framework. The analysis
identified a number of transition and physical risks for nib Group, as noted in nib’s TCFD report. The scenario analysis will be
refreshed during FY23.
12 Annual Report 2022
for the year ended 30 June 2022 Five year summary
Consolidated Income Statement
Net premium revenue
Net claims incurred1
Gross margin
Movement in policy liabilities
Other underwriting revenue
Management expenses
Underwriting result
Other income
Other expenses
Share of net profit/(loss) of associates and joint ventures
Underlying operating profit
Amortisation of acquired intangibles
Impairment of intangibles
One-off transactions, merger, acquisition and new
business implementation costs
Statutory operating profit
Finance income and costs
Net investment income
Profit before tax
Tax
NPAT
Consolidated Balance Sheet
Total assets
Equity
Debt
Share Performance
Number of shares
Weighted average number of shares – basic
Weighted average number of shares – diluted
Basic earnings per share
Diluted earnings per share
Share price at year end
Dividend per share – ordinary
Dividend payout ratio – ordinary
Other financial data
ROIC2
Group underlying operating revenue
Operating cash flow
2022
$m
2021
$m
2020
$m
2019
$m
2018
$m
2,703.4
2,548.8
2,439.6
2,340.8
2,162.6
(2,066.3)
(1,985.5)
(1,933.4)
(1,811.4)
(1,694.3)
637.1
563.3
506.2
529.4
468.3
(0.3)
6.4
(383.9)
259.3
51.5
(68.2)
(7.3)
235.3
(7.7)
–
(0.1)
227.5
(6.7)
(30.0)
190.8
(57.0)
133.8
–
3.8
(337.4)
229.7
24.1
(44.1)
(4.8)
204.9
(8.0)
(8.8)
(2.1)
186.0
(6.8)
51.8
231.0
(70.5)
160.5
–
3.5
(332.2)
177.5
60.1
(86.7)
(4.0)
146.9
(10.4)
(8.0)
(13.6)
114.9
(9.7)
16.6
121.8
(34.8)
87.0
–
3.6
(329.1)
203.9
77.2
(78.3)
(1.0)
201.8
(9.2)
(1.0)
(7.0)
184.6
(7.7)
36.1
213.0
(63.7)
149.3
–
3.0
(287.1)
184.2
69.5
(68.4)
(0.5)
184.8
(8.4)
–
(7.4)
169.0
(6.3)
29.6
192.3
(58.8)
133.5
1,880.4
1,702.8
1,677.8
1,554.1
1,447.5
734.3
260.9
459.1
458.4
458.4
29.6
29.6
7.38
22.00
74.4
706.2
232.3
457.7
457.2
457.2
35.2
35.2
6.51
24.00
68.2
603.1
232.9
456.8
456.1
456.1
19.3
19.3
4.62
14.00
71.0
632.2
233.9
455.6
455.4
455.4
32.9
32.9
7.68
23.00
70.0
557.8
230.6
454.8
450.6
450.6
29.4
29.4
5.72
20.00
68.5
14.7
2,761.3
337.6
19.1
2,576.7
108.7
11.2
2,503.2
207.6
19.1
2,421.6
184.5
19.5
2,235.1
179.9
m
m
m
cps
cps
$
cps
%
%
$m
$m
1. Net incurred claims differs to the face of the Consolidated Income Statement and Segment Reporting as this table includes claims handling expenses in management expenses.
2. ROIC calculated using average shareholders’ equity including non-controlling interests and average interest-bearing debt over a rolling 12 month period.
Annual Report 2022 13
Directors’ Report
for the year ended 30 June 2022
The Directors of nib holdings limited (Company) present their
report on the consolidated entity (Group) consisting of nib
holdings limited and the entities it controlled at the end of,
or during, the year ended 30 June 2022.
Dividends
Dividends paid to shareholders during the financial year were
as follows:
Final dividend for the year ended 30 June 2021
of 14.0 cents (2020 – 4.0 cents) per fully paid
share paid on 5 October 2021
Interim dividend for the year ended 30 June
2022 of 11.0 cents (2021 – 10.0 cents) per fully
paid share paid on 4 April 2022
2022
$m
2021
$m
64.0
18.3
50.3
114.3
45.6
63.9
In addition to these dividends, since the end of the financial year
the Directors have recommended the payment of a fully franked
final dividend of $50.5 million (11.0 cents per fully paid ordinary
share) to be paid on 4 October 2022 out of retained profits at
30 June 2022.
Matters subsequent to the end of the
financial year
On 8 July 2022, nib holdings limited acquired an additional equity
holding in Midnight Health Pty Limited for $12.0 million, resulting
in an increased ownership percentage to 63.14%. From that
date, the Group gained control of Midnight Health Pty Limited
and will consolidate the financial statements and recognise a
non-controlling interest.
No other matter or circumstance has arisen since 30 June 2022
that has significantly affected, or may significantly affect:
the Group’s operations in future financial years; or
a)
b) the results of those operations in future financial years; or
c)
the Group’s state of affairs in future financial years.
Environmental regulation
The Group is not subject to any specific environmental regulation
and has not breached any legislation regarding environmental
matters.
Directors
The following persons were Directors of nib holdings limited
during the whole of the financial year and up to the date of this
report unless otherwise indicated:
David Gordon
Lee Ausburn
Anne Loveridge
Mark Fitzgibbon
Jacqueline Chow
Donal O’Dwyer
Steve Crane (retired as Chair and Director on 29 July 2021)
Peter Harmer (appointed Director on 20 July 2021)
Principal activities
The principal activities of the nib Group during the financial year
were as a private health insurer in Australia and New Zealand,
whereby it underwrites and distributes private health insurance
to Australian and New Zealand residents as well as international
students and visitors to Australia. Through its nib Travel
business, it also specialises in the sale and distribution of travel
insurance policies globally.
The Group also undertakes specialist health care data
science services through its joint venture with Cigna,
Honeysuckle Health.
During the year, nib acquired Kiwi Insurance Limited
(a wholly owned subsidiary of Kiwi Group Holdings Limited,
now renamed nib nz insurance limited) for a final purchase price
of $41.9 million, and commenced underwriting and distributing
life and living insurance in New Zealand.
Review of operations
Information on the operations and financial position of the
Group and its business strategies and prospects is set out
in the Operating and Financial Review on pages 3 to 13 of
this Annual Report.
Significant changes in the state of affairs
There were no other significant changes in the state of affairs of
the Group during the financial year.
Likely developments and expected results
from operations
Additional comments on expected results on operations of the
Group are included in this Annual Report under Operating and
Financial Review on pages 3 to 13.
Further information on likely developments in the operations of
the Group have not been included in this Annual Report because
the Directors believe it would be likely to result in unreasonable
prejudice to the Group.
14 Annual Report 2022
Information on Directors
Details of the qualifications, experience, special responsibilities and interests in shares and performance rights of the Directors
are as follows:
David Gordon – Chair
LLB (University of NSW),
BCom (University of NSW), MAICD
Mark Fitzgibbon – Chief Executive
Officer and Managing Director
MBA (University of Technology
Sydney), MA (Macquarie University),
ALCA (Charles Sturt University), FAICD
Age: 61
Independent Non-Executive Director
Age: 62
Executive Director
David was appointed to the Board of nib holdings limited in May
2020 and Chair since 29 July 2021. He is also the Chair of the
Nomination Committee.
He is also a Director of nib health funds limited.
Industry experience
David has over 20 years’ experience as a director of both public
and private companies and has spent more than 30 years
working in corporate advisory roles to Australian and international
organisations. He brings extensive knowledge of mergers and
acquisitions, as well as capital raisings, IPOs and joint ventures.
Mark joined nib in October 2002 as Chief Executive Officer. In 2007
as Managing Director, he led nib through its demutualisation and
listing on the Australian Securities Exchange (ASX) being admitted to
the S&P/ASX100 in 2019.
Mark is a Director of nib health funds limited, as well as many other
nib holdings limited’s subsidiaries. He is also a member of nib
holding’s Nomination Committee.
Industry experience
Mark has held executive positions at a number of large Australian
organisations, including local government councils and peak bodies.
David also has a proven track record in guiding businesses to grow
and harness their digital capability to successfully explore and
develop new products and markets.
Leading nib for the past 20 years, Mark has transformed the business
from a regionally based (Newcastle, NSW) private health insurer into
one of Australia’s fastest growing and innovative health funds.
Other business and market experience
David has held a number of senior roles with Freehills (Partner)
and boutique investment bank Wentworth Associates (acquired by
Investec in 2001). In addition, he founded independent corporate
advisory and investment firm, Lexicon Partners in 2001.
Directorships of listed entities
David is currently Chair of Accent Group Limited.
Former directorships of listed entities in the past
three years
None.
Other commitments
David is Chair of General Homecare Holdings Pty Ltd, Shippit
Pty Ltd and Genesis Capital Manager 1 Pty Ltd.
He is also a Non-Executive Director of international not-for-profit
organisation, High Resolves Pty Ltd.
Interests in shares and performance rights
Direct: 30,000 shares in nib holdings limited.
As Managing Director, Mark’s strategic focus has been to grow and
diversify nib’s business and with that earnings by leveraging nib’s
capability, systems and people. This has seen nib grow significantly
in recent years organically and inorganically, both in existing and
new markets.
Other business and market experience
Mark has previously served as CEO of both the national and NSW
peak industry bodies for licensed clubs, as well as holding several
General Manager positions in local government.
Directorships of listed entities
None.
Former directorships of listed entities in the past
three years
None.
Other commitments
Mark is currently a Director of Private Healthcare Australia.
Interests in shares and performance rights
Direct: 1,718,055 ordinary shares in nib holdings limited.
Indirect: 824,621 ordinary shares in nib holdings limited held by
Fitzy (NSW) Pty Ltd.
215,962 performance rights under FY19-FY22 Long Term Incentive
Plan which may vest from 1 September 2022.
200,632 performance rights under FY20-FY23 Long Term Incentive
Plan which may vest from 1 September 2023.
314,792 performance rights under FY21-FY24 Long Term Incentive
Plan which may vest from 1 September 2024.
220,251 performance rights under FY22-FY25 Long Term Incentive
Plan which may vest from 1 September 2025.
Annual Report 2022 15
Directors’ Report
Information on Directors continued
Lee Ausburn
MPharm (University of Sydney),
BPharm (University of Sydney),
Dip Hosp Pharm (University of Sydney),
FAICD
Age: 68
Jacqueline Chow
BSc (Hons) (University of NSW),
MBA (Northwestern University,
Chicago), GAICD
Age: 50
Independent Non-Executive Director
Independent Non-Executive Director
Lee was appointed to the Board of nib holdings limited in November
2013. She is Chair of the People and Remuneration Committee and
a member of the Risk and Reputation Committee and Nomination
Committee.
Jacqueline was appointed to the Board of nib holdings limited in
April 2018. She is Chair of the Risk and Reputation Committee and a
member of the Nomination Committee, Audit Committee and People
and Remuneration Committee.
She is also a Director of nib health funds limited.
Industry experience
With more than 30 years’ experience in the pharmaceuticals industry,
Lee has a wealth of knowledge in the global health industry.
Lee is a pharmacist with experience in retail and hospital pharmacy,
as well as in academia. She had a long career in the pharmaceutical
industry with Merck Sharp and Dohme (Australia) Pty Ltd and
was previously Vice President – Asia for Merck and Co Inc with
responsibility for the company’s operations across nine countries.
Lee built high performing organisations with enhanced ethical and
compliance frameworks, across the Asia Pacific region. She also has
extensive marketing experience with customer centric approaches
that had proven results with the region growing strongly under
her leadership. Operating in a highly regulated industry, Lee also
developed strong regulatory and government relations skills.
Other business and market experience
Lee was previously a member and President (2015-2017) of the
Pharmacy Foundation at the University of Sydney.
Lee has also been an industry representative on various government
regulatory bodies. Lee is currently a mentor for Women on Boards.
Former directorships of listed entities in the past
three years
Non-Executive Director of Australian Pharmaceutical Industries Ltd
and SomnoMed Ltd.
Interests in shares and performance rights
Indirect: 20,000 ordinary shares in nib holdings limited held by
Leedoc Pty Ltd and 30,885 ordinary shares in nib holdings limited
held by MIML Pension Consolidator (Lee Ausburn).
She is also a Director of nib health funds limited, nib nz limited and
nib nz holdings limited.
Industry experience
Jacqueline has more than 20 years’ experience working with global
blue-chip consumer product multinationals in a range of executive
and non-executive positions in general management, strategy,
marketing as well as technology and innovation. Her early career
concentrated on business analytics, brand equity and marketing.
With a reputation for driving growth and performance in global
businesses, she is passionate about unlocking value through the
entire value chain by growing consumer demand through disruptive
technologies, innovation and digital platforms.
She has also led company-wide business transformation by driving
productivity and efficiencies at every level, as well as embedding
leadership behaviours and change.
Jacqueline actively contributes toward ensuring the long term
sustainability of the organisations she serves in the areas of climate
scenario impacts, human rights and supply chain resilience.
Other business and market experience
Jacqueline has significant global experience driving strategic growth
and innovation across customer and consumer brands for the likes
of Fonterra, Campbell Arnott’s and the Kellogg Company.
She was previously Deputy Chair of Global Dairy Platform and
a Director of Fisher & Paykel Appliances in New Zealand, Dairy
Partners Americas, the Riddet Institute (Massey University NZ) and
The Arnott’s Foundation.
In her former role with McKinsey & Company RTS, she
advised clients across resources, retail, financial services,
telecommunications and consumer sectors on organisational change
and high performance culture.
Directorships of listed entities
Jacqueline is currently a Non-Executive Director of Coles Group
Limited, Boral Limited and Charter Hall Group.
Former directorships of listed entities in the past
three years
None.
Other commitments
Jacqueline is a Non-Executive Director of the Australia-Israel
Chamber of Commerce and a member of Chief Executive Women.
Interests in shares and performance rights
Direct: 50,000 shares in nib holdings limited.
16 Annual Report 2022
for the year ended 30 June 2022 Peter Harmer
Harvard Advanced
Management Program
Anne Loveridge
BA (Hons) (University of Reading),
FCA, GAICD
Age: 61
Age: 60
Independent Non-Executive Director
Independent Non-Executive Director
Peter was appointed to the Board of nib holdings limited in July
2021. He is a member of Risk and Reputation Committee, People
and Remuneration Committee, Investment Committee and
Nomination Committee.
Anne was appointed to the Board of nib holdings limited in February
2017. She is the Chair of the Audit Committee and a member of
the Investment Committee, Risk and Reputation Committee and
Nomination Committee.
He is also a Director of nib health funds limited.
Industry experience
Peter has over 40 years’ experience in the Australian and
international insurance and financial sectors, including over 30 years
in a senior executive capacity.
He has a deep understanding of the global insurance and
reinsurance markets and has driven the improvement of business
and customer experiences through digital innovation. During his
career, Peter accelerated digital engagement through re-examining
customer journeys to understand pain points and introduced the
right tools and technology to help improve the overall customer
experience.
In addition, he has been focused on the development and design
of agile working methodologies combined with Human Centred
Design thinking to ensure best practice in employee productivity,
performance, health and wellbeing.
Other business and market experience
Peter was formerly Chief Executive Officer of Insurance Australia
Group (IAG), CGU Insurance, Aon Limited UK, Aon Risk Services
Australia Pacific and Aon Re Australia and has successfully led
business’ growth agendas, major acquisitions, and industry roll-ups.
Prior to his role as Chief Executive Officer at IAG, he took up a
secondment role as Chief Digital Officer to help drive IAG’s digital
strategy. This included building a centralised capability to improve
the customer experience through the utilisation of new technology
and data insights.
Directorships of listed entities
Peter is currently a Non-Executive Director of Commonwealth Bank
of Australia and AUB Group Limited.
Former directorships of listed entities in the past
three years
Executive Director of Insurance Australia Group (IAG).
Other commitments
Peter is Non-Executive Director of Lawcover Pty Ltd. He is also
a member of the Advisory Council for Bain & Company, and an
Executive Mentor with Merrick & Co ANZ.
Interests in shares and performance rights
Direct: 11,078 shares in nib holdings limited.
In addition, Anne is a Director of nib health funds limited, nib nz
limited and nib nz holdings limited. She is also Chair of the Audit,
Risk and Compliance Committee of nib nz holdings limited.
Industry experience
Anne has over 35 years of experience in the highly regulated financial
services sector, including health insurance.
She has extensive knowledge of financial and regulatory reporting,
risk management and compliance frameworks. She also has over
five years’ experience as a Non-Executive Director for ASX-listed
entities in the financial services sector.
Through senior leadership roles, Anne also has championed
the role of leadership, performance and culture in successfully
driving change.
Formally trained as a Chartered Accountant, Anne has a breadth
of experience in financial reporting, auditing, risk, ethics and
regulatory affairs following her 31 years with PwC in the UK and
Australia, where she was a Senior Partner and Deputy Chair of the
Australian Firm.
Anne is entitled to receive a retirement benefit from PwC as part of
her retirement plan. The amount of the payment was determined at
the time of retirement, in 2015, based on role and tenure with the
firm. The benefit is not impacted by the revenue, profits or earnings
of PwC. Anne has declared her previous relationship with PwC to
the nib Board and the Board is satisfied that it does not affect her
independence as Non-Executive Director and does not constitute
a conflict of interest. The nib Board has in place mechanisms to
manage conflicts of interest where they arise.
Directorships of listed entities
Anne is a Non-Executive Director of Platinum Asset Management
and National Australia Bank Limited.
Former directorships of listed entities in the past
three years
None.
Other commitments
Anne is a Non-Executive Director of Destination NSW. She is also
a member of Chief Executive Women.
Interests in shares and performance rights
Direct: 35,000 shares in nib holdings limited.
Annual Report 2022 17
Directors’ Report
Information on Directors continued
Donal O’Dwyer
MBA (Manchester Business School),
BE (University College, Dublin)
Former Directors
Steve Crane retired from the Board on 29 July 2021. Steve had
been Chair and a Non-Executive Director since September 2010.
Age: 69
Independent Non-Executive Director
Donal was appointed to the Board of nib holdings limited in
March 2016. He is Chair of the Investment Committee, and a
member of the Audit Committee, People and Remuneration
Committee and Nomination Committee.
He is also a Director of nib health funds limited.
Industry experience
Donal has a deep knowledge of the health industry globally,
after more than 35 years in senior executive and Non-Executive
Director roles within the healthcare products and medical
device sectors.
Starting his career as a qualified civil engineer, he went on to
gain experience in business, science, engineering, manufacturing
and management. During his tenure with Baxter Healthcare, he
rose through the ranks from plant manager to President of the
Cardiovascular Group Europe, gaining a sound understanding of
the inner workings of business strategy and fiscal management,
from the floor of the factory through to the boardroom. He then
worked for Cordis (the cardiovascular device franchise of
Johnson & Johnson) – initially as European President and later,
when he located to the US, he served as Worldwide President.
Donal has a strong interest in environmental, social and
governance factors and how these performance indicators can
help promote long term financial success.
Directorships of listed entities
Donal is a Non-Executive Director of Fisher & Paykel Healthcare
Corporation Ltd.
Former directorships of listed entities in the past
three years
Non-Executive Director of Mesoblast Ltd and Cochlear Limited.
Interests in shares and performance rights
Indirect: 41,485 ordinary shares in nib holdings limited held by
Dundrum Investments Pty Ltd.
18 Annual Report 2022
for the year ended 30 June 2022 Company Secretaries
Ms Roslyn Toms LLB (UNSW), BA Comms (Hons) (UCAN/UTS), GAICD was appointed Company Secretary on 29 April 2013. Ms Toms
is also Group Executive - Legal and Chief Risk Officer and is responsible for managing legal, risk, compliance, governance, clinical,
community & sustainability across the nib group businesses in Australia and its global operations. Ms Toms is a member of the Law
Society of NSW and the Governance Institute. She is also director of the nib foundation and is a graduate of the Australian Institute of
Company Directors (AICD).
Mr Jordan French (BSc (Hons) LLB (Macquarie)) was appointed Company Secretary on 15 August 2017. Mr French also acts in the
role of Senior Corporate Counsel and Head of Sustainability (acting) for the nib Group, as well as the Company Secretary for nib
foundation Ltd.
Meetings of Directors
The number of meetings of nib holdings limited’s Board of Directors and of each Board committee held during the year ended 30 June
2022, and the numbers of meetings attended by each Director are noted below. All directors may attend Committee meetings even
if they are not a member of a Committee. The table below excludes the attendance of Directors at Committee meetings where they
were not a Committee member.
Board
Audit
Committee
Risk and Reputation
Committee
People and
Remuneration
Committee
Investment
Committee
Nomination
Committee
Name
S Crane2
D Gordon3
M Fitzgibbon
L Ausburn
J Chow4
P Harmer5
A Loveridge
D O’Dwyer6
Held1
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Attended
2
15
15
15
15
15
15
15
2
15
15
15
15
15
15
14
–
–
–
–
7
–
7
7
–
–
–
–
7
–
7
6
–
–
–
6
6
6
6
1
–
–
–
6
6
6
6
1
–
1
6
6
4
–
6
–
1
–
6
6
4
–
6
–
–
–
–
2
3
3
3
–
–
–
–
2
3
3
3
–
3
3
3
3
3
3
3
–
3
3
3
3
3
3
3
1. Includes four unscheduled board meetings called at short notice.
2. S Crane retired as a Director on 29 July 2021. The stated number of meetings held for Mr. Crane are those that were convened during the financial year prior to his retirement.
3. D Gordon ceased to be a member of the Audit Committee and the People and Remuneration Committee effective 29 July 2021. The stated number of meetings of the People and Remuneration
Committee held for Mr Gordon are those that were convened during the period he was a member of that committee.
4. J Chow ceased to be a member of the Investment Committee effective 26 November 2021. The stated number of meetings of the Investment Committee held for Ms Chow are those that were
convened during the period she was a member of that committee.
5. P Harmer was appointed as a Director on 20 July 2021 and appointed as a member of the Risk and Reputation Committee and the Investment Committee on 29 July 2021, and the People and
Remuneration Committee on 11 August 2021. The stated number of meetings of the People and Remuneration Committee held for Mr Harmer are those that were convened during the period he
was a member of that committee.
6. D O’Dwyer ceased to be a member of the Risk and Reputation Committee effective 29 July 2021. The stated number of meetings of the Risk and Reputation Committee held for Mr O’Dwyer are
those that were convened during the period he was a member of that committee.
Remuneration report
The Remuneration Report is set out on pages 22 to 44 of the Annual Report and forms part of this Report.
Shares under performance rights
Unissued ordinary shares of nib holdings limited under performance rights at the date of this report are as follows:
Date performance rights granted
Expiry date
23 November 2018
11 December 2019
28 February 2020
27 November 2020
8 April 2021
26 November 2021
1 September 2022
1 September 2023
1 September 2023
1 September 2024
1 September 2024
1 September 2025
Issue price
of shares
Number under
performance right
nil
nil
nil
nil
nil
nil
422,078
380,171
32,836
714,784
2,134
556,176
Shares may be issued or acquired on-market at the election of the Company. It is anticipated that the performance rights will be
satisfied through on-market share purchases administered by the nib Holdings Ltd Share Ownership Plan Trust.
No performance right holder has any right under the performance rights to participate in any other share issue of the Company or any
other entity.
Annual Report 2022 19
Directors’ Report
Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise
and experience with the Group are important.
Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit and non-audit services during the year are
disclosed in Note 32 Remuneration of Auditors.
The Board of Directors has considered the position and, in accordance with advice received from the Audit Committee, is satisfied
that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out in Note 32, did
not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed by the Audit Committee to ensure that they did not impact the impartiality and
objectivity of the auditor;
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics
for Professional Accountants.
Insurance of officers
During the financial year, the Group paid a premium in respect of a contract insuring the Directors and Officers of the Group against
liability incurred as such a Director or Officer, other than conduct involving wilful breach of duty in relation to the Group, to the extent
permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of
the premium.
Auditor’s independence declaration
A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 21.
Rounding of amounts
The Company is of a kind referred to in Instrument 2016/191, issued by the Australian Securities and Investments Commission,
relating to the “rounding off” of amounts in the Directors’ Report. Amounts in the Directors’ Report have been rounded off to the
nearest hundred thousand dollars in accordance with that Instrument.
This report is made in accordance with a resolution of the Directors.
On behalf of the Board
David Gordon
Director
Newcastle, NSW
19 August 2022
Anne Loveridge
Director
20 Annual Report 2022
for the year ended 30 June 2022
Auditor’s Independence Declaration
For the year ended 30 June 2022
Auditor’s Independence Declaration
As lead auditor for the audit of nib holdings limited for the year ended 30 June 2022, I declare that to
the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of nib holdings limited and the entities it controlled during the period.
SK Fergusson
Partner
PricewaterhouseCoopers
Newcastle
19 August 2022
PricewaterhouseCoopers, ABN 52 780 433 757
Level 3, 45 Watt Street, PO Box 798, NEWCASTLE NSW 2300
T: +61 2 4925 1100, F: +61 2 4925 1199, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Annual Report 2022 21
Remuneration Report
for the year ended 30 June 2022
Message from the People and Remuneration Committee Chair
Dear Shareholder
On behalf of the Board, I am pleased to present nib Group’s FY22 Remuneration Report.
As David and Mark highlight in their reports, the nib Group achieved strong financial results in FY22, despite the ongoing impacts
of COVID-19 on every part of our business. Group underlying operating profit (UOP) grew 14.8% to $235.3 million, while statutory
earnings per share fell 15.9% to 29.6 cents per share, driven by strong UOP, but offset by lower investment returns attributed to the
highly volatile global market conditions. Total shareholder return1 (TSR) for the year was 18.9% which compares favourably to (5.9)%
for the ASX200.
Group performance against non-financial metrics was equally strong. We maintained or improved our net promoter score in 4 out
of 5 segments, reduced member/traveller complaint volumes in all segments and exceeded target across all employee and safety
measures. We also made excellent progress on our strategic plan, including delivery of several key Payer to Partner (P2P) milestones
which are discussed further on page 34.
Throughout the year we were pleased to welcome 411 new employees across the Group, including 20 employees who joined our
nib New Zealand business as part of our acquisition of Kiwi Insurance Limited in April 2022. Despite the challenges of a tight labour
market, voluntary attrition remained relatively stable in FY22 at 18.5% (up slightly from 17.9% in FY21).
The Board recognises that in the current market, a competitive employee value proposition (EVP) is critical to ensure nib can continue
to attract and retain talented employees to deliver on our Group strategy. This year we invested in several enhancements to our EVP,
which included increasing the employee discount on private health insurance, launching a range of market-leading leave benefits
and continuing to evolve our approach to hybrid work, giving employees greater choice – not only in where they work, but also
when and how.
Remuneration outcomes in FY22
As indicated in last year’s Remuneration Report, based on our external benchmarks, the MD/CEO’s fixed remuneration for FY22
increased by 2.5%, while Group Executives received increases between 2.5-8.6% to ensure that remuneration levels remain
competitive and appropriately reflect the responsibilities of each Executive. Non-Executive Director fees also increased by 2.5%,
with the exception of the NZ Chairman who received a 7% increase to reflect movement in the NZ market. These increases were
broadly in line with the increases awarded to employees across the Group.
The MD/CEO’s short-term incentive (STI) outcome for the 2022 financial year was 89.5% of maximum, reflecting the Group’s strong
financial and non-financial performance. STI outcomes for Group Executives ranged between 67-96% of maximum, with an average
of 88%.
The 2019 LTI reached the end of its four-year performance period on 30 June 2022, resulting in a vesting outcome of 50%.
This reflects full vesting against the relative TSR measure, with nib ranking at the 80th percentile against the comparator group,
while the earnings per share (EPS) compound annual growth rate component did not vest due to performance being below
threshold which was expected given the impacts of COVID-19 on EPS growth.
Culture, diversity & inclusion
Our people strategy in FY22 has focused on initiatives that foster safety, wellbeing, inclusion, diversity of thought and professional
development for employees across the nib Group.
Our most recent employee experience results showed strong growth in engagement over the past 12 months, achieving a
75% engagement score (6bps up from FY21), which compares favourably to global and Australian benchmarks (72% and 69%
respectively). We also introduced new wellbeing and inclusion metrics this year, reaching a strong 74% wellbeing score and 80%
employee inclusion score.
We also made great progress on our Diversity, Equity and Inclusion (DE&I) Action Plan. Key achievements included the completion
of our nib Reflect Reconciliation Action Plan, the expansion of our DE&I measurable objectives, external recognition through the
Bloomberg Gender Equality Index and New Zealand Rainbow, Accessibility and CQ Ticks, plus introducing enhanced leave benefits
to better support our parents and carers, as well as our culturally and gender diverse employees. Further information on these
achievements can be found in nib’s 2022 Sustainability Report and in the 2022 Corporate Governance Statement.
1 Source: Bloomberg. 12-month TSR. Total shareholder return represents the simple return over the holding period due to the change in the share price plus dividends re-invested on the
ex-dividend date.
22 Annual Report 2022
Looking ahead
Over the past 12 months, the Board has spent considerable time evaluating nib’s executive remuneration framework to ensure
it remains fit for purpose, aligns to our Group strategy and appropriately rewards nib’s Executives for delivering sustainable
performance and shareholder value. In doing so, the Board considered feedback from a range of stakeholders including shareholders,
proxy advisers and regulators, while also considering how nib’s remuneration practices compare to other organisations so we can
continue to attract and retain high calibre talent in an increasingly competitive market.
While the Board determined nib’s remuneration framework to be suitably robust and capable of driving strong outcomes for
shareholders, some opportunities for improvement were identified which will be implemented in FY23, including:
•
•
improving transparency in relation to disclosure of target performance and remuneration outcomes;
implementing separate Group and individual scorecards to better balance executive accountability while continuing to
incentivise performance at a Group level;
•
incorporating additional ESG metrics into the executive STI scorecards to support delivery of nib’s sustainability strategy; and
• strengthening our evaluation of risk by introducing a Risk & Conduct Modifier and Consequence Management Framework as a
mechanism to apply downward adjustments for adverse risk outcomes and to support compliance with the incoming CPS 511
remuneration standard.
The Board is confident these changes will further strengthen nib’s remuneration framework and continue to drive strong and
sustainable outcomes for our members, travellers and shareholders alike.
As we reflect on nib’s 70th anniversary, I’d like to take this opportunity to thank our employees for their ongoing commitment to
fulfilling nib’s purpose of ’your better health and wellbeing’. nib is truly a remarkable organisation, and its success can only be
attributed to the hard work, creativity and dedication our employees demonstrate to our members, travellers and the organisation.
Thank you for taking the time to read our FY22 Remuneration Report, which will be presented for adoption at nib’s Annual General
Meeting in November. As always, we welcome your feedback.
Lee Ausburn
Chair
People and Remuneration Committee
Annual Report 2022 23
Remuneration Report
Contents
Key Terms Used in this Report
Remuneration Overview
Key Management Personnel
Our Remuneration Governance
Executive Remuneration Structure
Executive Remuneration Mix
Executive Remuneration for the Financial Year ended 30 June 2022
Linking Remuneration with Performance
Executive Employment Conditions
Non-executive Director Remuneration
Detailed Disclosure of Executive Remuneration
Detailed Disclosure of Non-Executive Remuneration
Equity Instruments Held by Key Management Personnel
24
25
26
27
28
29
33
37
37
38
40
41
42
Key terms used in this report
FY21
FY22
FY23
AGM
Group
KMP
KPI
LTI
LTIP
NPAT
Financial year ended 30 June 2021
Financial year ended 30 June 2022
Financial year ended 30 June 2023
Annual General Meeting
nib holdings limited consolidated entity
Key Management Personnel (those Directors and Executives who have responsibility for planning, directing and
controlling the activities of nib, either directly or indirectly)
Key Performance Indicator
Long-Term Incentive
Long-Term Incentive Plan
Net Profit After Tax
PARCO
People and Remuneration Committee
STI
TFR
TSR
Short-Term Incentive
Total Fixed Remuneration
Total Shareholder Return
24 Annual Report 2022
for the year ended 30 June 2022 Remuneration overview
Our Remuneration Principles
Aligned to
shareholder value
creation
Rewards
sustainable
performance
Market
competitive
Simple and
transparent
Recognises the role
of non-financial
value drivers
Supports prudent
risk management
and conduct
Fixed Remuneration (FR)
Short-Term Incentive (STI)
Long-Term Incentive (LTI)
l
e Provides market competitive
a
n
o
i
t
a
R
remuneration to attract and retain high
calibre talent. Reflects role size and
accountability.
e Base salary, superannuation
r
u
and short- term benefits
t
c
u
(e.g. insurance cover)
r
t
S
h Reviewed annually against relevant
c
a
o
r
p
p
A
comparator group remuneration
benchmarks.
For Australia-based Executives the
comparator groups are:
Rewards Executives for achievement
against predetermined financial and
non-financial performance measures.
Rewards Executives for creating
sustainable, long-term shareholder
value.
50% paid in cash
25% deferred into shares,
restricted 1 year
25% deferred into shares,
restricted 2 years
Rights to shares with no dividend
equivalent payments. Vesting is subject
to performance over a four-year period,
with 50% of the award held in escrow
for a further 2 years.
Quantum
Quantum
• Maximum opportunity of 125%
of FR for the CEO (between 50%
and 100% for other Executives)
Performance Measures
• Maximum face value allocation
of 125% of FR for the CEO
(between 30% and 60% for other
Executives)
• ASX listed companies with a
• 50% financial measures, being
market capitalisation 50-200%
of nib
• ASX listed companies within
the financial services and
healthcare sectors with a market
capitalisation 33-300% of nib
For the CEO nib NZ, the primary
comparator group is a select group of
listed and unlisted companies within the
financial services sector in NZ.
revenue growth, profitability and
cost control (65% for CFO, 35%
for GELCRO)
• 50% non-financial measures,
being member/traveler
satisfaction, employee
engagement, safety and other
role-specific measures (35% for
CFO, 65% for GELCRO)
See page 31 for further information on
the STI Plan.
Performance Measures:
• Relative TSR (50%)
• Statutory EPS (50%)
See page 32 for further information on
the LTI Plan.
Remuneration outcomes – FY22 snapshot
Fixed Remuneration Increase
2.5%
MD/CEO
Other Executives
2.5 – 8.6%
STI awarded
89.5% of maximum
67% to 96% of maximum
LTI which reached the end of its
performance period on 30 June 2022
50% of the award vested, being:
• 100% vesting for the Relative TSR hurdle
• Nil vesting for the Statutory EPS hurdle
Annual Report 2022 25
Remuneration Report
Key Management Personnel
This Report presents the remuneration arrangements for nib’s key management personnel.
Name
Chairman
David Gordon
Position
Chairman
Chair, Nomination Committee
Current Non-Executive Directors
Lee Ausburn
Jacqueline Chow
Member, People and Remuneration Committee
Member, Audit Committee
Member, Nomination Committee
Chair, People and Remuneration Committee
Member, Risk and Reputation Committee
Member, Nomination Committee
Chair, Risk and Reputation Committee
Director, New Zealand subsidiaries (from 24 November 2021)
Member, People and Remuneration Committee
Member, Audit Committee
Member, Investment Committee (until 26 November 2021)
Member, Nomination Committee
Term as KMP
From 29 July 2021
Until 29 July 2021
Full year
Full year
Peter Harmer
Anne Loveridge
Donal O’Dwyer
Former Non-Executive Director
Steve Crane
Managing Director & CEO
Member, Investment Committee (from 29 July 2021)
Member, People and Remuneration Committee (from 11 August 2021)
Member, Risk and Reputation Committee (from 29 July 2021)
Member, Nomination Committee (from 20 July 2021)
From 20 July 2021
Chair, Audit Committee
Chair Board Audit, Risk and Compliance Committee New Zealand
Director, New Zealand subsidiaries
Member, Risk and Reputation Committee
Member, Investment Committee
Member, Nomination Committee
Chair, Investment Committee
Member, People and Remuneration Committee
Member, Audit Committee (from 29 July 2021)
Member, Risk and Reputation Committee (until 29 July 2021)
Member, Nomination Committee
Full year
Full year
Chairman
Chair, Nomination Committee
Until 29 July 2021
Mark Fitzgibbon
Managing Director/Chief Executive Officer (MD/CEO)
Group Chief People Officer (CPO)
Chief Executive, International Visitors (CE IV)
Chief Executive, Australian Residents Health Insurance (CE ARHI)
Group Chief Financial Officer (CFO)
Chief Executive, nib Travel (CE TRAVEL)
Chief Executive Officer, nib New Zealand (CEO NZ)
Group Chief Information Officer (CIO)
Group Chief Operations Officer (COO)
Group Executive, Legal and Chief Risk Officer (GELCRO)
Current Executives
Martin Adlington
James Barr
Edward Close
Nick Freeman
Anna Gladman
Rob Hennin
Brendan Mills
Matt Paterson
Roslyn Toms
26 Annual Report 2022
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
for the year ended 30 June 2022 Our Remuneration Governance
nib Board
Responsible for the Governance of the company, including ensuring nib’s remuneration framework and executive reward
outcomes are transparent and suitably robust, and aligned with the interests of our members, travellers, employees,
shareholders, and the community’s expectations.
Considers recommendations from PARCO regarding changes to nib Group’s Executive reward and recognition framework including
long-term and short term incentive arrangements. The Board is responsible for assessing the performance of the MD/CEO.
Parco
The role of PARCO is to ensure nib’s remuneration framework supports nib’s business
strategy assisting and advising the Board on:
• remuneration strategy, policies and
• reviewing the company values and
practices;
• setting measurable diversity and
inclusion targets and reviewing the nib
Diversity, Equity and Inclusion Policy;
• reviewing the People and Culture
strategy, succession planning processes;
the inculcation of those values
throughout the organisation; and
• monitoring employee engagement
and culture.
Risk gateway
assessment
PARCO conducts a formal
assessment of each Executive
with input from nib’s Risk and
Reputation Committee as
well as nib’s Chief Risk Officer
to confirm performance
warrants award.
Shareholders
and other
stakeholders
External
remuneration
advisers
Management
nib Board and PARCO
representatives seek feedback
from industry stakeholders,
including major shareholders and
shareholder interest groups, to
assist in remuneration decisions.
PARCO regularly engages
external remuneration
advisors to assist in Executive
salary benchmarking
against a comparator group
of companies.
The MD/CEO is responsible for assessing
the performance of other Executives
which is subject to Board approval.
The role of our People and Remuneration Committee (Committee) is to ensure alignment of nib’s remuneration framework and
executive reward strategy against the short and long-term performance of the nib Group, assessed through a combination of financial
and non-financial measures. The Committee also has an ongoing role to assess remuneration and performance to ensure it is
consistent with shareholder and community expectations.
As part of this process the Committee seeks advice and feedback from a range of external stakeholders from time-to-time, including
remuneration consultants, specialists, major shareholders and shareholder advisory groups.
When assessing our remuneration framework strategy, the Committee ensures there is a clear link to nib’s culture and values as well
as risk management and business strategy. Guiding this process is an intent to create a workplace and environment that attracts,
retains, develops and appropriately rewards our people. External factors such as the operating environment, governance and
regulatory expectations also feed into this process.
The Committee includes the following independent Non-Executive Directors:
Lee Ausburn (Chair)
Jacqueline Chow
Peter Harmer
Donal O’Dwyer
Shareholders can view the Committee Charter on the nib website (nib.com.au/shareholders).
Annual Report 2022 27
Remuneration Report
Executive Remuneration Structure
Executive remuneration is based on nib’s performance assessed using a combination of metrics and time frames, ensuring reward is
linked to decision-making and performance, aligned to our values and culture, is sustainable, consistent with our long-term business
strategy and shareholder value creation.
The structure of our executive remuneration arrangements are set against a comparator group of listed organisations or peers, which
nib determines in consultation with external remuneration advisors. The aim is to position the fixed remuneration of our Executive
Management team between the 50th and 75th percentile of benchmarked companies. The Committee also considers shareholder
views when setting the remuneration of our MD/CEO and Executive Management team, with feedback shared by the Committee.
nib’s remuneration framework and executive reward strategy provides a mix of fixed and variable remuneration assessed against short
and long-term performance. There are three components to total remuneration:
• fixed remuneration, comprising a base remuneration package, superannuation and insurance cover;
• short-term incentives based on pre-determined Key Performance Indicator (KPI) financial and non-financial targets established
by the Board as well as individual and leadership assessment; and
•
longer-term incentives based on pre-determined Total Shareholder Return (TSR) and Statutory Earnings Per Share (EPS)
performance hurdles, established by the Board.
A significant portion of remuneration for our Executives is performance-based or “at risk” through Short-Term Incentives (STI) and
Long-Term Incentives (LTI). All Executives’ performance-based incentives (STI and LTI) include claw-back arrangements and a malus
condition.
If the Board becomes aware of a material misstatement of our financial accounts or statements, and nib has awarded an Executive an
incentive payment or award, short or long-term, having regard to misstatement, the Board may (at its absolute discretion), require the
Executive to:
•
•
repay the Company any short or long-term incentive received; or
forfeit or cancel any short or long-term award (vested or unvested).
When granting a variable remuneration component for each Executive relating to the performance period, such as STI and LTI
Awards, the Board also ensures any governance, adverse risk taking, or audit issues are factored into the quantum of payments to
each Executive. To support this, a risk gate assessment is applied for our STI Plan where our People and Remuneration Committee
and Chief Risk Officer evaluate the risk culture and risk management, with input from nib’s Risk and Reputation Committee, to confirm
Executive performance warrants award.
28 Annual Report 2022
for the year ended 30 June 2022
Executive Remuneration Mix
The remuneration structure for each executive is made up of the following components:
Total fixed remuneration
(cash salary, superannuation,
plus insurance cover)
+
Short-term incentive (STI)
being cash and deferral
into shares
+
Long-term incentive (LTI)
being performance rights
=
Total potential reward
Fixed
Variable
The graph below illustrates the FY22 remuneration mix for our Executives based on maximum total remuneration opportunity.
Any variations in remuneration mix between executive roles reflect position responsibilities. As can be seen from the graph a large
portion of Executive remuneration is “at risk” and subject to meeting performance hurdles as set out through the STI and LTI for each
Executive.
36%
18%
18%
28%
y
t
i
n
u
t
r
o
p
p
o
n
o
i
t
a
r
e
n
u
m
e
r
x
a
m
%
24%
24%
19%
19%
19%
19%
38%
38%
17%
14%
14%
17%
14%
14%
55%
55%
24%
19%
19%
38%
22%
17%
17%
44%
17%
14%
14%
55%
22%
22%
17%
17%
17%
17%
44%
44%
MD/CEO
CE ARHI
CEO NZ
CE IV
CE TRAVEL
CFO
CIO
CPO
COO
GELCRO
Fixed remuneration (base salary, superannuation + benefits)
Maximum short-term incentive opportunity – cash
Maximum short-term incentive opportunity – deferred into shares
Long-term incentive grant
The following diagram provides an illustrative indication of how FY22 financial year remuneration will be delivered to Executives:
Fixed remuneration
STI cash 50%
STI deferred shares
25% for 1 year
STI deferred shares
25% for 2 years
LTI performance rights (FY22-25 grant)
50% unrestricted
50% subject to 2 year restriction
FY22
FY23
FY24
FY25
FY26
FY27
Date granted
Date paid
Date eligible for vesting
Annual Report 2022 29
Remuneration Report
Executive Remuneration Mix – Fixed Remuneration
Fixed remuneration for Executives reflects their core responsibilities and duties, which is determined with reference to a benchmarking
process, external market factors, competition to attract and retain talent, as well as consideration of the expertise of the individual in
the role. Fixed Executive remuneration is set between the 50th and 75th percentile of benchmarked companies, with consideration to
adjust based on the size and specialty of the role, as well as the skills and experience of the Executive.
Fixed remuneration includes cash salary, superannuation and insurance cover. The fixed remuneration may be salary packaged at no
additional cost to the Group. Adjustments to an Executive’s remuneration are generally only made where their remuneration is below
benchmarked companies or there is a material change in the Executive’s responsibilities.
nib typically seeks guidance from external remuneration consultants every two years. In May 2021, we engaged EY to provide
remuneration benchmarking data which the Committee considered along with a range of other factors in determining the both the
FY22 and FY23 remuneration reviews. The information provided by EY did not constitute a remuneration recommendation in relation
to KMP as defined by Division 1 of part 1.2 of Chapter 1 of the Corporations Act 2001.
The companies that make up our peer group for assessing benchmark remuneration data include the following sectors and industries:
• Australian market capitalisation comparator group (all roles except the CEO NZ): this includes ASX200 companies within 50-
200% of nib’s market capitalisation;
• Australian industry-based comparator group (all roles except the CEO NZ): this includes selected ASX200 financial services and
healthcare companies within 33-300% of nib’s market capitalisation;
• New Zealand industry-based comparator group (nib New Zealand Chief Executive Officer only): both listed and unlisted financial
services companies in New Zealand.
In setting executive reward for FY23, the Board considered the remuneration data along with a range of other factors, including the
performance of the company, the external competitive market and shareholders’ views. Based on this review, the Board approved
fixed remuneration increases ranging between 3.0% and 11.3% to ensure remuneration levels remain competitive and aligned to
market rates.
Details of FY22 and FY23 fixed remuneration levels for all Executives are provided below:
Executives
Mark Fitzgibbon
Martin Adlington
James Barr
Edward Close
Nick Freeman
Anna Gladman
Rob Hennin2
Brendan Mills
Matt Paterson
Roslyn Toms
1. Includes base salary and superannuation.
2. Includes base salary and employer contributions to KiwiSaver, reflected in New Zealand dollars.
Total fixed remuneration1 $
FY23
FY22
1,207,500
1,172,000
422,000
422,000
576,000
708,000
422,000
390,500
390,500
517,500
687,000
390,500
NZD 590,000 NZD 572,500
475,500
475,500
475,500
461,500
461,500
461,500
30 Annual Report 2022
for the year ended 30 June 2022
Executive Remuneration Mix – Variable Remuneration
Short-term incentives (STI)
nib’s short-term incentive (STI) plan for each Executive is structured as follows.
Cash (50%)
Deferred into shares (50%)
1 year deferral (50%)
2 year deferral (50%)
=
Total potential STI
Variable (Determined by a mixture of financial, non-financial and individual performance outcomes)
The Board is responsible for assessing the performance of the MD/CEO and the MD/CEO is responsible for assessing the
performance of other Executives (with approval of the resulting STI awards subject to a Committee risk gate assessment prior to
Board approval).
Due to the importance of risk management, compliance and behaviour, our People and Remuneration Committee conduct a formal
assessment of each Executive prior to the award of the STI with input from nib’s Risk and Reputation Committee and nib’s Chief
Risk Officer.
The MD/CEO potential STI is 125% of TFR with other Executives in a range of 50%-100% of TFR. Actual outcomes are determined
on performance criteria based on two components:
1. Individual and leadership assessment, which makes up 15% of the total STI. The individual and leadership component ensures
we continue to recognise the contribution our Executives make in developing a high-performance organisational culture and seek
a balance between the financial and non-financial performance of our business.
The leadership component for the MD/CEO is assessed as part of an annual performance review by the Board, factors which are
considered include:
• Leadership
• Strategic planning
• Board/Joint Ventures
• Financial management
• Shareholder communication and return
• Public image and professional development
• Operations and Culture
The Board also takes into account the MD/CEO’s progress in achieving the various goals set out in nib’s strategic plan.
In determining the leadership component for other members of the Executive team, the MD/CEO provides a detailed assessment
of each Executive’s progress and achievements in relation to their individual performance plans for the year. The individual’s
performance plans are based on nib’s strategic plan and reflect the Executive’s primary accountability. The Board considers and
determines the leadership component for each Executive based upon the MD/CEO’s recommendations.
nib does not disclose individual performance hurdles and metrics of the STI for the MD/CEO if they are commercially or
strategically sensitive.
2. Company performance assessment that makes up 85% of the total STI. The performance component is assessed against
predetermined financial and non-financial performance milestones for each Executive and is weighted accordingly (for FY22 this
is set out on page 34). In some instances, an Executive’s STI assessment may also include strategic milestones, which can be
assessed over multi-year periods.
The table on page 34 details the remuneration outcomes for the MD/CEO against performance criteria for the FY22 STI award.
The table on page 35 shows the STI award for each Executive for FY22 and previous year relating to their performance against both
components of the STI.
A condition of acceptance for each Executive in the STI Plan is the requirement that 50% of the STI be deferred into shares, with 50%
having a one-year deferral and the remaining 50% deferred for two years. These shares are subject to a risk of forfeiture during the
deferral period under malus and clawback conditions.
Annual Report 2022 31
Remuneration Report
Executive Remuneration Mix – Variable Remuneration continued
Long-term incentives (LTI)
nib’s long-term incentive (LTI) plan for each Executive is structured as follows.
LTI issue of Rights
4 year performance period
Tranche 1 (50%): TSR
Tranche 2 (50%): EPS
=
LTI awarded
With 50% of total award
having 2 years escrow period
The purpose of the LTI is to balance short-term performance objectives with the creation of long-term shareholder value by focusing
overall Group performance over a multi-year period.
The nib LTI is an incentive provided to eligible Executives if specific measures are met over a four-year period. LTI targets are set in
the interests of creating long-term shareholder value and to assist nib to attract, reward, motivate and retain executives.
LTI participants are granted performance rights that enable the Executive to acquire shares in nib for nil consideration if performance
conditions are met and the Executive is still employed by nib at the end of the vesting period. No dividends are received on
unvested rights.
The vesting date may be accelerated at the Board’s discretion:
•
in the event of death of a participant;
• on cessation of employment for other reasons (including total and permanent disablement, redundancy and retirement); or
• on winding up, delisting, change of control and reconstruction or amalgamation.
Participation in the plan is at the Board’s discretion and no individual has a contractual right to participate in the plan or to receive any
guaranteed benefits.
The performance hurdles for the nib LTI are Total Shareholder Return (TSR) relative to the S&P/ASX200 over four years and Statutory
EPS growth over the performance period. The LTI is allocated in two equal tranches; 50% for TSR and 50% for Statutory EPS.
The Board’s view is that our current LTI performance hurdles being EPS and TSR relative to S&P/ASX200 group of companies remain
appropriate and aligned to our remuneration philosophy. We will continue to assess the appropriateness of these performance
hurdles each year and consult with shareholders, proxy advisors and other shareholder representative groups regarding any future
amendments to ensure they are aligned to shareholders’ interests and regulatory requirements.
A condition of acceptance for each Executive in the LTI Plan is the requirement for 50% of the LTI to have a two-year escrow period.
This escrow period extends beyond employment at nib ceasing, including termination.
If vesting conditions are met, the performance rights will vest following the end of the performance period. On the vesting date,
Executives who hold vested performance rights will be either issued or transferred shares in nib for each vested performance right.
There is no re-testing of performance.
32 Annual Report 2022
for the year ended 30 June 2022
Executive Remuneration for the Financial Year ended 30 June 2022
Actual remuneration received
Actual remuneration for each Executive in FY22 included a fixed component, as well as a variable or at-risk component, made up of
an STI payment and LTI award.
The table below details remuneration received by Executives during the financial year, including:
• fixed pay and other benefits paid during the financial year;
•
•
the value of STI awards (cash and shares held in escrow) received during the financial year; and
the value of prior years’ deferred LTI awards that vested during the financial year.
Statutory remuneration disclosures prepared in accordance with the Corporations Act 2001 and Australian Accounting Standards
differ to the numbers presented below, as they include expensing for equity grants that are yet to realise or may never be realised.
Statutory remuneration table is presented on page 40.
Actual Remuneration Received (non statutory)
Mark Fitzgibbon
Martin Adlington
James Barr
Edward Close
Nick Freeman
Anna Gladman
Rob Hennin
Brendan Mills
Matt Paterson
Roslyn Toms
STI applicable to the
FY21 year paid in Sept 2021 (FY22)2
Total fixed
remuneration1
$
Shares held in
escrow
$
LTI vested in
FY223
$
Cash
$
Total reward
(received or
available)
$
1,172,000
546,335
546,335
946,372
3,211,042
390,500
390,500
517,500
687,000
390,500
550,049
461,500
461,500
461,500
40,898
38,341
186,052
251,107
38,066
185,100
132,399
123,223
121,498
40,897
38,340
186,051
251,107
38,065
189,343
132,398
123,223
121,498
–
–
–
–
–
472,295
467,181
889,603
1,189,214
466,631
179,875
1,104,367
133,527
–
130,910
859,824
707,946
835,406
5,482,549
1,663,019
1,667,257
1,390,684
10,203,509
1. Total fixed remuneration comprises cash salaries and fees, superannuation and leave entitlements paid on termination.
2. FY21 STI paid in the FY22 year.
3. Value of shares issued during the year on exercise of performance rights.
Short-term incentives for the financial year ended 30 June 2022
For the FY22 STI, the Board considered a number of financial and non-financial performance measures to be appropriate metrics
and hurdles. The performance outcomes against these measures are reflected in the MD/CEO’s FY22 remuneration outcomes. nib
Executives were subject to similar performance assessments, reflecting their area of responsibility and function within the nib Group.
Short-term performance targets are set for achieving specific financial and non-financial business and individual performance
outcomes, with awards made relative to true outperformance. Due to the commercial and strategic nature of some STI targets for
Executives, nib does not disclose some specific KPIs for key management personnel.
Annual Report 2022 33
Remuneration Report
Executive Remuneration for the Financial Year ended 30 June 2022 continued
Short-term incentives for the financial year ended 30 June 2022 continued
The table below summarises performance versus target against each FY22 STI component for the MD/CEO for both financial and
non-financial measures based on 30 June 2022 actuals.
Performance outcome
(% of maximum)
t
e
g
r
a
t
l
o
t
d
o
h
s
e
r
h
t
e
v
o
b
A
)
d
r
a
w
a
%
5
7
-
5
2
(
)
d
r
a
w
a
%
0
(
)
d
r
a
w
a
%
0
0
1
-
5
7
(
t
e
g
r
a
T
e
v
o
b
A
)
d
r
a
w
a
%
0
0
1
(
h
c
t
e
r
t
S
)
d
r
a
w
a
%
5
7
(
t
e
g
r
a
T
t
A
l
d
o
h
s
e
r
h
t
w
o
Category
Measure
Weight B
l
e
arhi premium
revenue
10%
Growth
Group
underlying
revenue1
Group
underlying
operating
profit2
Group
statutory
earnings per
share (EPS)
10%
20%
10%
Profitability
Customer
Net promoter
score (NPS)
and complaint
volume3
10%
People &
Safety
Employee
engagement
5%
Lost time
injury
frequency
rate (LTIFR)
5%
Strategy
Achievement
of Payer to
Partner (P2P)
targets
15%
Leadership Leadership
15%
100%
STI
Award
9%
FY22 Achievement
arhi underlying revenue was 1.5% above target at
$2,286.2m (up 5.2%) driven by net policyholder
growth of 3.2%, prior year pricing adjustments and
lower downgrading.
10%
Group underlying revenue was 3.2% above target at
$2,761.5m (up 7.2%), resulting in the maximum STI award.
The Group delivered a UOP result of $235.3m (up 14.8%),
driven by strong revenue growth and favourable claims
experience. The Group UOP result which was 30.8%
above target, resulting in the maximum STI award.
Statutory EPS was down 15.9% to 29.6cps due to the
$81.8m turnaround in investment income and was only
partially offset by higher Group UOP. Despite this, the
result was 5.46% above the target of 28.1cps, resulting in
the maximum STI award.
All segments were at or above threshold, with arhi at
target (30), ishi and iwhi above target (ishi 47, iwhi 43)
and travel and NZ at threshold (52 and 34 respectively).
Complaint volumes were at stretch, with member/traveller
complaints reducing by at least 7.5% in all segments
(measured as a % of total policyholders). The aggregate
result was just below target.
Employee engagement was at stretch, with a 75%
engagement score (up 6bps). This compares favourably
to global and Australian benchmarks (72% and
69% respectively).
LTIFR measures the number of lost-time injuries relative
to the total number of hours worked in that period and
is a proxy measurement for safety performance. Group
LTIFR was at stretch, achieving 0.76 against a target of 2.
This represents a 43% reduction compared to FY21 and
resulted in the maximum STI award.
The Board set a range ambitious goals related to delivery
of our P2P strategy. Of the 9 targets set, 7 were fully
achieved and the remaining 2 were partially achieved.
FY22 highlights included the launch of Good Health Plan
and a risk profile, several non-PHI products including our
non-PHI membership GreenPass, and the acquisition of
Kiwi Insurance Limited in NZ.
The Board evaluated the CEO’s leadership performance
against the criteria outlined on page 31. The Board
determined that the CEO’s leadership during FY22 was
above target, awarding 80% of the maximum.
20%
10%
7.25%
5%
5%
11.25%
12%
89.5%
1 Premium revenue, other underwriting revenue and other income from non-underwriting businesses, excluding one-off transactions.
2 Underwriting result, other income and expenses including non-underwriting businesses. It excludes amortisation of acquired intangibles, one-off transactions (integration of acquired business,
establishment of business costs as well as extraordinary legal fees), merger and acquisition costs, finance costs, net investment income and income tax.
3 arhi, iihi, nz, nib travel.
34 Annual Report 2022
for the year ended 30 June 2022
Actual FY22 STIs awarded and forfeited (as a percentage of total STI) for each Executive are set out below:
Mark Fitzgibbon
Martin Adlington
James Barr
Edward Close
Nick Freeman
Anna Gladman
Rob Hennin
Brendan Mills
Matt Paterson
Roslyn Toms
Group average
FY22 STI Bonus
FY21 STI Bonus
Total Awarded
%
Forfeited
%
Total Awarded
%
Forfeited
%
89.5%
91.7%
96.0%
89.4%
93.5%
67.0%
87.0%
89.8%
88.4%
86.1%
87.8%
10.5%
8.3%
4.0%
10.6%
6.5%
33.0%
13.0%
10.2%
11.6%
13.9%
12.2%
76.5%
73.6%
69.0%
77.7%
75.0%
68.5%
74.5%
73.6%
68.5%
72.6%
72.9%
23.5%
26.4%
31.0%
22.3%
25.0%
31.5%
25.5%
26.4%
31.5%
27.4%
27.1%
Annual Report 2022 35
Remuneration Report
Executive Remuneration for the Financial Year ended 30 June 2022 continued
Long-term incentives for the financial year ended 30 June 2022
nib LTI performance rights vest in accordance with the achievement of the following vesting conditions:
Vesting Condition 1
Vesting Condition 2
50% of the performance rights (Tranche 1)
50% of the performance rights (Tranche 2)
Total shareholder return targets (TSR Hurdle) for the relevant performance
period are met
Earnings per share growth targets (EPS Hurdle) for the relevant perfor-
mance period are met
TSR Hurdle (Tranche 1)
For the four-year performance period ended 30 June 2022, nib’s TSR was ranked at the 80th percentile to our peer group
(S&P/ASX 200). As per the TSR vesting SR vesting conditions for the FY19-FY22 LTI (as set out below) this translates to a 100%
vesting of the performance rights for Tranche 1.
nib’s TSR performance compared to the relevant peer group
Performance of Tranche 1 performance rights vesting
>= 75th percentile
100%
>= 50th percentile to 74th percentile
Pro-rata straight line vesting between 50% and 74%
< 50th percentile
0%
%
n
r
u
t
e
R
r
e
d
l
o
h
e
r
a
h
S
l
a
t
o
T
700
600
500
400
300
200
100
0
-100
Four year Relative TSR
nib (52.80%)
nib 52.80%
80th Percentile
1 4 7
0
1
3
1
6
1
9
1
2
2
5
2
8
2
1
3
4
3
7
3
0
4
3
4
6
4
9
4
2
5
5
5
8
5
1
6
4
6
7
6
0
7
3
7
6
7
9
7
2
8
5
8
8
8
1
9
4
9
7
9
0
0
1
3
0
1
6
0
1
9
0
1
2
1
1
5
1
1
8
1
1
1
2
1
4
2
1
7
2
1
0
3
1
3
3
1
6
3
1
9
3
1
2
4
1
5
4
1
8
4
1
1
5
1
4
5
1
7
5
1
0
6
1
3
6
1
6
6
1
9
6
1
2
7
1
5
7
1
Company Number
Source: Orient Capital (as at 30 June 2022). In accordance with the terms of the LTI Grant, ranking excludes companies that were delisted from the ASX during the performance period.
Statutory EPS Hurdle (Tranche 2)
For the 12 months to 30 June 2022 nib’s Statutory EPS was 29.6 cps. As per the Statutory EPS vesting conditions for the FY19-FY22
LTI (as set out below) this translates to Statutory EPS CAGR of 0.17% from the base Statutory EPS of 29.4 cps and nil vesting of the
performance rights for Tranche 2.
Percentage of performance rights vesting
100%
75%
50%
25%
0%
FY19-FY22 LTIP
41.5 cps
38.5 cps
35.7 cps
33.1 cps
nil
For the purpose of the calculation, 25% to 50% will be discrete thresholds, with performance above the 50% entitlement calculated on a pro rata basis to a maximum entitlement of 100%.
36 Annual Report 2022
for the year ended 30 June 2022
Linking Remuneration with Performance
The components of remuneration that are linked to performance are the STI and LTI plans. Set performance indicators determine 85%
of the STI award, while 15% is assessed on the leadership of each Executive. Refer table on page 34 for summary of performance
versus target against each FY22 STI component for the MD/CEO. The Five Year Summary on page 13 details the Group’s financial
performance and KPI results for the last five years.
Commercial and strategic milestone targets were set for some of our Executives, including the MD/CEO, which are dependent and
assessed on their segment and area of responsibility. These metrics are not disclosed due to their commercially sensitive nature.
Executive Employment Conditions
Executive contracts summarise employment terms and conditions, including remuneration arrangements and compensation.
A significant portion of remuneration for our Executives is performance based through STI and LTI arrangements. Executives have
claw-back arrangements and a malus condition in place for performance-based remuneration such as STI and LTI received.
The table below provides a summary of the agreements.
Service agreement effective
Mark Fitzgibbon (MD/CEO)
Martin Adlington (CPO)
James Barr (CE IV)
Edward Close (CE ARHI)
Nick Freeman (CFO)
Anna Gladman (CE TRAVEL)
Rob Hennin (CEO NZ)
Brendan Mills (CIO)
Matt Paterson (COO)
Roslyn Toms (GELCRO)
Permanent
Permanent
Permanent
Permanent
Permanent
Permanent
Permanent
Permanent
Permanent
Permanent
Notice by nib
12 months
3 months1
3 months
6 months
6 months
3 months
9 months
12 months
6 months
6 months
Termination provisions
Notice by employee
3 months
3 months1
3 months
6 months
6 months
3 months
3 months
3 months
6 months
3 months
1 Mr Adlington had a notice period of 3 months in FY22. Effective 1 August 2022, the notice period was varied to 6 months.
Termination payments
Where notice is given by nib, the Group may make a payment in lieu of all or part of the notice period.
The Executive may also receive the following benefits upon termination:
• a pro-rata STI payment based on the period of the financial year during which the Executive was employed and the Board’s
assessment of the Executive’s performance against the key performance indicators as at the date of termination; and/or
•
the Board has discretion to determine that all or a portion of unvested performance rights of a participant of the LTIP are to be
vested upon termination.
At the 2011 Annual General Meeting nib received shareholder approval for the payment of termination benefits that may exceed the
12 month salary limit on termination benefits under the Corporations Act 2001. In response to shareholder feedback, the Board has
since determined that this approval will only be undertaken for Executives who held this position at the date of shareholder approval.
The only current Executive this approval would be applicable to is Mark Fitzgibbon (MD/CEO).
Minimum shareholding requirements
While nib does not set minimum shareholding requirements on our Executives, the Board’s view is that the deferral arrangements
under the STI and LTI means all Executives have an appropriate minimum equity holding.
Annual Report 2022 37
Remuneration Report
Non-executive Director Remuneration
Fees and payments to Non-Executive Directors (NED) reflect the Board role, market fee levels, and the objective of the Group to
attract highly skilled and experienced non-executive directors.
Non-Executive Director fees
Our Non-Executive Directors are paid a base fee and an additional fee for being members of other nib Board Committees.
Non-Executive Director fees are reviewed annually by the Committee and approved by the Board.
nib typically seeks guidance from external remuneration consultants every two years. In May 2021, we engaged EY to conduct
a benchmarking and market remuneration analysis, which the Committee used together with a range of other factors and
supplementary data to inform our FY22 and FY23 analysis. For FY23 the Board approved a 3% increase to NED fees.
Non-Executive Director fees are determined within the $1.9 million aggregate nib Directors’ fee pool limit. This includes Non-Executive
Directors on the nib holdings limited Board, our nib New Zealand subsidiary, as well as our nib Travel business. Directors’ fees and
superannuation are paid out of this pool. Travel allowances, non-monetary benefits and retirement benefits are not included in this
pool. The current aggregate fee pool was set at the AGM in November 2017.
The following table shows the fees (inclusive of superannuation) for nib’s Australian Boards and Committees:
2022
$
2021
$
326,800
135,500
318,800
132,200
33,600
14,100
32,800
13,800
19,000
11,100
18,500
10,800
33,600
14,100
32,800
13,800
33,600
14,100
32,800
13,800
–
–
–
–
Base fees
Chairman
Other Non-Executive Directors
Additional fees*
Audit committee
Chairman
Member
Investment committee
Chairman
Member
Risk and Reputation committee
Chairman
Member
People and Remuneration committee
Chairman
Member
Nomination committee
Chairman
Member
* The Chairman of the Board does not receive additional fees for involvement in committees.
38 Annual Report 2022
for the year ended 30 June 2022
The following fees (inclusive of superannuation) for the New Zealand boards and committees have applied:
NZ Base fees1
Chairman2
Member (AU domiciled)3
Member (NZ domiciled)
NZ Board, Audit, Risk and Compliance committee1
Chairman (AU domiciled)3
Member
2022
$
84,419
43,000
42,866
2021
$
78,290
42,000
41,519
10,600
–
10,300
–
1 All amounts are converted to AUD.
2 The Chairman and NZ domiciled Directors of the NZ Board are not members of the nib holdings limited Board.
3 The AU domiciled Director, Anne Loveridge, is also member of the nib holdings limited board.
nib’s Corporate Governance Statement (which is available at www.nib.com.au/shareholders/company-profile/corporate-governance)
includes the committee membership of each of nib’s NEDs (Non-Executive Directors).
Minimum shareholding requirements (MSR)
All Non-Executive Directors (nib holdings limited only) are required to hold a minimum of 100% of the annual base director’s fee in
shares, which is to be accumulated within four years of appointment.
The Board reviewed the minimum shareholding requirements for Non-Executive Directors during FY22 which resulted in a change to
the methodology by which the MSR is tested. From FY23, compliance with the MSR will be tested annually using the relevant base
fee (Chairman or Director fee) and the higher of:
a)
the market value at 30 June each year, calculated using the volume-weighted average price for the 30 days up to and
including 30 June; or
b) the market value on the date the shares were acquired.
All current Non-Executive Directors (nib holdings limited) comply with this requirement as at 30 June 2022, or are within the four-year
accumulation period.
Annual Report 2022 39
Remuneration Report
Detailed Disclosure of Executive Remuneration
The following table shows details of the remuneration expense recognised for the Group’s Key Management Personnel (KMP). The
remuneration is measured in accordance with the requirements of the accounting standards with additional information provided for
performance rights vested during the year.
Short-term employee benefits
Post-employment
benefits
Long-term
benefits
Termination
benefits
Share-based payments
Cash salary
and fees1
$
Cash
bonus
$
Non-
monetary
benefits2
$
Superannuation
$
Long
service
leave
$
Termination
benefits
$
Bonus3
$
Performance
rights
expense
$
Performance
rights
additional
value at
vesting4
$
Total
$
Executives
2022
Mark Fitzgibbon
1,121,672
655,588
46,904
28,037
19,587
Martin Adlington
385,037
89,522
James Barr
367,014
93,720
Edward Close
488,070
231,323
7,423
4,426
2,200
Nick Freeman
682,073
321,173
15,542
Anna Gladman
376,026
65,409
6,907
Rob Hennin
535,993
234,992
24,338
Brendan Mills
452,229
165,771
Matt Paterson
457,554
163,186
Roslyn Toms
438,029
158,941
3,106
5,358
7,658
23,568
23,568
23,568
23,568
23,568
42,824
23,568
23,568
23,568
6,523
6,526
–
–
–
–
7,713
–
7,707
–
–
–
–
–
–
–
–
–
–
655,588
733,102
131,603
3,392,081
89,522
93,720
30,400
30,400
231,323
109,825
321,173
138,492
65,409
40,950
–
–
–
–
–
631,995
619,374
1,086,309
1,502,021
578,269
239,235
151,671
25,012
1,254,065
165,771
119,615
18,568
956,341
163,186
93,201
–
906,053
158,941
116,139
18,202
929,185
5,303,697 2,179,625
123,862
259,405
48,056
– 2,183,868
1,563,795
193,385 11,855,693
2021
Mark Fitzgibbon
1,107,870
546,335
25,462
26,569
19,041
Martin Adlington
339,967
63,146
James Barr
329,299
59,198
Edward Close
483,976
185,810
5,986
3,702
1,927
Nick Freeman
685,512
251,107
12,674
Anna Gladman
388,984
62,225
6,139
Rob Hennin
466,858
180,994
18,080
Brendan Mills
431,724
132,399
2,708
Mellissa Naidoo
(until 30/4/21)
315,771
–
Matt Paterson
447,288
123,223
Roslyn Toms
391,897
121,498
4,389
4,562
6,977
21,694
21,694
21,694
21,694
22,589
38,210
21,694
21,694
21,694
21,694
5,982
(212)
–
–
–
–
7,491
–
–
7,078
–
–
–
–
–
–
–
–
546,335
805,810
40,227
3,117,649
40,898
38,341
186,052
251,107
38,066
7,715
7,715
52,520
67,302
17,701
–
–
–
–
–
485,388
459,737
931,979
1,289,396
535,704
178,250
152,369
10,080
1,044,841
132,399
115,344
7,097
850,856
235,676
–
–
123,223
40,040
–
–
577,530
760,030
121,498
116,059
(1,654)
785,047
–
–
5,389,146 1,725,935
92,606
260,920
39,380
235,676 1,656,169
1,382,575
55,750 10,838,157
1
Includes cash salary and fees and short-term compensated absences, such as annual leave entitlements accrued during the year.
2 Non-monetary benefits includes insurance cover and cost of benefits and associated Fringe Benefits Tax.
3
Includes bonus share rights. Refer to Share-based payments.
4 The Performance rights additional value at vesting represents the difference between fair value at grant date and the value at vesting date which is not included in statutory remuneration.
40 Annual Report 2022
for the year ended 30 June 2022
Detailed Disclosure of Non-Executive Remuneration
Details of the remuneration of the Directors of the nib holdings group are set out in the following tables.
Non-Executive Directors
2022
David Gordon
Steve Crane (until 29 July 2021)
Lee Ausburn
Jacqueline Chow
Peter Harmer (from 20 July 2021)
Anne Loveridge
Donal O’Dywer
2021
Steve Crane
Lee Ausburn
Jacqueline Chow
David Gordon
Anne Loveridge
Christine McLoughlin (until 30/9/2020)
Donal O’Dywer
1 Non-monetary benefits includes a retirement gift and associated fringe benefits tax.
Short-term employee benefits
Post-employment
benefits
Cash salary and
fees
$
Non-monetary
benefits1
$
Super
-annuation
$
307,827
23,632
166,545
227,576
149,700
236,632
166,091
–
3,626
–
–
–
–
–
1,278,003
3,626
297,106
163,288
201,729
156,334
236,653
31,818
162,831
1,249,759
–
–
–
–
–
4,830
–
4,830
5,892
2,363
16,655
–
14,970
11,268
16,609
67,757
21,694
15,512
–
4,676
5,247
3,023
15,469
65,621
Total
$
313,719
29,621
183,200
227,576
164,670
247,900
182,700
1,349,386
318,800
178,800
201,729
161,010
241,900
39,671
178,300
1,320,210
Annual Report 2022 41
Remuneration Report
Equity Instruments Held by Key Management Personnel
Reconciliation of performance rights held by KMP
The numbers of performance rights over ordinary shares in the Company held during the financial year by each Executive of
nib holdings limited are set out below.
Balance at the
start of the year
Unvested
Granted as
compensation
Vested and exercised
Lapsed
Balance as at the
end of the year
Number
%
Number
%
Other
Changes
Vested and
exercisable
Unvested
Name & Grant dates
Mark Fitzgibbon
15 Dec 2017 (FY18 - FY21 LTIP)
23 Nov 2018 (FY19 - FY22 LTIP)
11 Dec 2019 (FY20 - FY23 LTIP)
27 Nov 2020 (FY21 - FY24 LTIP)
222,298
215,962
200,632
314,792
–
–
–
–
26 Nov 2021 (FY22 - FY25 LTIP)
–
220,251
Martin Adlington
27 Nov 2020 (FY21 - FY24 LTIP)
12,247
–
26 Nov 2021 (FY22 - FY25 LTIP)
–
17,612
James Barr
27 Nov 2020 (FY21 - FY24 LTIP)
12,247
–
26 Nov 2021 (FY22 - FY25 LTIP)
–
17,612
Edward Close
28 Feb 2020 (FY20 - FY23 LTIP)
27 Nov 2020 (FY21 - FY24 LTIP)
20,063
63,305
–
–
26 Nov 2021 (FY22 - FY25 LTIP)
–
46,681
Nick Freeman
27 Nov 2020 (FY21 - FY24 LTIP)
88,548
–
26 Nov 2021 (FY22 - FY25 LTIP)
–
61,970
Anna Gladman
21 Dec 2019 (FY20 - FY23 LTIP)
27 Nov 2020 (FY21 - FY24 LTIP)
10,416
16,374
–
–
26 Nov 2021 (FY22 - FY25 LTIP)
–
17,612
Rob Hennin
15 Dec 2017 (FY18 - FY21 LTIP)
23 Nov 2018 (FY19 - FY22 LTIP)
11 Dec 2019 (FY20 - FY23 LTIP)
27 Nov 2020 (FY21 - FY24 LTIP)
42,252
40,324
38,648
64,197
–
–
–
–
26 Nov 2021 (FY22 - FY25 LTIP)
–
49,551
142,870
64.3%
79,428
35.7%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
27,155
64.3%
15,097
35.7%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
215,962
200,632
314,792
220,251
12,247
17,612
12,247
17,612
20,063
63,305
46,681
88,548
61,970
10,416
16,374
17,612
–
40,324
38,648
64,197
49,551
42 Annual Report 2022
for the year ended 30 June 2022 Balance at the
start of the year
Unvested
Granted as
compensation
Vested and exercised
Lapsed
Balance as at the
end of the year
Number
%
Number
%
Other
Changes
Vested and
exercisable
Unvested
Name & Grant dates
Brendan Mills
15 Dec 2017 (FY18 - FY21 LTIP)
23 Nov 2018 (FY19 - FY22 LTIP)
11 Dec 2019 (FY20 - FY23 LTIP)
27 Nov 2020 (FY21 - FY24 LTIP)
31,365
30,747
28,562
49,560
–
–
–
–
26 Nov 2021 (FY22 - FY25 LTIP)
–
41,629
Matt Paterson
28 Feb 2020 (FY20 - FY23 LTIP)
27 Nov 2020 (FY21 - FY24 LTIP)
12,773
49,560
–
–
26 Nov 2021 (FY22 - FY25 LTIP)
–
41,629
Roslyn Toms
15 Dec 2017 (FY18 - FY21 LTIP)
23 Nov 2018 (FY19 - FY22 LTIP)
11 Dec 2019 (FY20 - FY23 LTIP)
27 Nov 2020 (FY21 - FY24 LTIP)
8 Apr 2021 (FY21 - FY24 LTIP)
30,751
29,508
28,014
43,954
2,134
–
–
–
–
–
26 Nov 2021 (FY22 - FY25 LTIP)
–
41,629
20,158
64.3%
11,207
35.7%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
19,763
64.3%
10,988
35.7%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
30,747
28,562
49,560
41,629
12,773
49,560
41,629
–
29,508
28,014
43,954
2,134
41,629
Annual Report 2022 43
Remuneration Report
Equity Instruments Held by Key Management Personnel continued
Reconciliation of performance rights held by KMP continued
To date nib’s practice has been to source equity for remuneration awards from shares purchased on market. Accordingly, there was
no dilution from Executive new issue equity awards in FY22.
The terms and conditions of each grant of options affecting remuneration in the current or a future reporting period are:
LTIP
Grant date
Date vested and
exercisable
Expiry date
Exercise
price
FY18-FY21
15 December 2017
1 September 2021
1 September 2021
FY19-FY22
23 November 2018
1 September 2022
1 September 2022
FY20-FY23
11 December 2019
1 September 2023
1 September 2023
FY20-FY23
28 February 2020
1 September 2023
1 September 2023
FY21-FY24
27 November 2020
1 September 2024
1 September 2024
FY21-FY24
8 April 2021
1 September 2024
1 September 2024
FY22-FY25
26 November 2021
1 September 2025
1 September 2025
nil
nil
nil
nil
nil
nil
nil
Value per
performance
right at grant
date
$6.0813
Performance
achieved
64.3%
% Vested
64.3%
$4.4229
to be determined
$6.0675
to be determined
$4.0758
to be determined
$4.4760
to be determined
$4.4760
to be determined
$5.9205
to be determined
n/a
n/a
n/a
n/a
n/a
n/a
Share holdings
The number of shares in the Company held during the financial year by each Director of nib holdings limited and other Key
Management Personnel of the Group, including their personally related parties, are set out below.
2022
Ordinary shares
Directors of nib group
Steve Crane
Lee Ausburn
Jacqueline Chow
David Gordon
Peter Harmer
Anne Loveridge
Donal O’Dwyer
Other key management personnel of the Group
Mark Fitzgibbon
Martin Adlington
James Barr
Edward Close
Nick Freeman
Anna Gladman
Rob Hennin
Brendan Mills
Matt Paterson
Roslyn Toms
Balance at the
start of the year
Granted during
the year as
compensation
Shares
purchased
Shares sold
Other changes
during the year
Balance at the
end of the year
100,000
50,885
50,000
30,000
–
23,885
41,485
–
–
–
–
–
–
–
2,564,329
225,347
19,151
23,898
10,827
466
–
274,523
110,069
8,223
45,047
6,174
5,788
28,087
37,908
5,746
55,739
40,145
18,602
38,105
–
–
–
–
11,078
11,115
–
–
–
–
–
–
–
137
–
–
–
–
–
–
–
–
–
–
(247,000)
–
(19,537)
–
–
–
–
–
–
(10,000)
(100,000)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
50,885
50,000
30,000
11,078
35,000
41,485
2,542,676
25,325
10,149
38,914
38,374
5,746
330,399
150,214
26,825
73,152
Other transactions with key management personnel
There were no transactions with other related parties during the year.
44 Annual Report 2022
for the year ended 30 June 2022
Corporate Governance Statement
The nib Board and management are committed to achieving and demonstrating the highest standards of corporate governance
and ensuring compliance with the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations
(4th edition).
The Board is dedicated to, and responsible for, actively promoting ethical and responsible decision making and practices at nib to
ensure that practices are in place to maintain confidence in nib’s integrity.
The 2022 Corporate Governance Statement is dated as at 30 June 2022 and reflects the corporate governance practices in place
throughout the 2022 financial year. The Corporate Governance Statement was approved by the Board on 28 July 2022. A description
of the Group’s current corporate governance practices is set out in the Group’s Corporate Governance Statement which can be
viewed at www.nib.com.au/shareholders/company-profile/corporate-governance.
Annual Report 2022 45
Financial Report
for the year ended 30 June 2022
Table of Contents
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
1. Summary of Significant Accounting Policies
2. Critical Accounting Judgements and Estimates
3. Risk Management
4. Fair Value Measurement
5. Segment Reporting
6. Revenue and Other Income
7. Expenses
8. Taxation
9. Cash and Cash Equivalents
10. Receivables
11. Financial Assets
12. Deferred Acquisition Costs
13. Property, Plant & Equipment
14. Intangible Assets
15. Lease Assets and Liabilities
16. Payables
17. Borrowings
18. Claims Liabilities
19. Unearned Premium Liability and Unexpired Risk Liability
20. Premium Payback Liability
21. Policy Liabilities – Life Insurance
22. Provisions and Employee Entitlements
23. Contributed Equity
24. Retained Profits
25. Reserves
26. Dividends
27. Earnings Per Share
28. Capital Management
29. Commitments for Expenditure
30. Contingent Liabilities
31. Events Occurring after the Balance Sheet Date
32. Remuneration of Auditors
33. Business Combination
34. Interest in Other Entities
35. Related Party Transactions
36. Share-Based Payments
37. Parent Entity Financial Information
46 Annual Report 2022
47
48
49
50
51
52
52
55
56
62
64
67
69
70
74
76
78
80
81
82
86
88
89
90
94
95
97
101
102
103
104
105
106
107
109
110
110
110
111
113
116
117
120
Consolidated Income Statement
for the year ended 30 June 2022
Premium revenue
Outwards reinsurance premium expense
Net premium revenue
Claims expense
Reinsurance and other recoveries revenue
RESA levy
State levies
(Increase)/decrease in premium payback liability
Claims handling expenses
Net claims incurred
Other underwriting revenue
Movement in policy liabilities
Acquisition costs
Other underwriting expenses
Underwriting expenses
Underwriting result
Other income
Other expenses
Share of net profit/(loss) of associates and joint ventures accounted for using the equity method
Operating profit
Finance income
Finance costs
Investment income
Investment expenses
Profit before income tax
Income tax expense
Profit for the year
Profit/(loss) for the year is attributable to:
Owners of nib holdings limited
Charitable foundation
Earnings per share for profit from continuing operations attributable to the ordinary equity holders of
the company
Basic earnings per share
Diluted earnings per share
Earnings per share for profit attributable to the ordinary equity holders of the company
Basic earnings per share
Diluted earnings per share
Notes
6
6
7
6
21
7
7
6
7
34
6
7
6
7
8
34
27
27
27
27
The above Consolidated Income Statement should be read in conjunction with the accompanying notes.
2022
$m
2021
$m
2,725.4
2,580.8
(22.0)
(32.0)
2,703.4
2,548.8
(1,817.1)
(1,753.9)
11.5
(228.7)
(39.1)
7.1
(18.7)
15.9
(213.8)
(36.0)
2.3
(19.4)
(2,085.0)
(2,004.9)
6.4
(0.3)
(183.1)
(188.2)
(371.6)
253.2
54.2
(72.6)
(7.3)
227.5
0.3
(7.0)
(27.3)
(2.7)
190.8
(57.0)
133.8
135.7
(1.9)
133.8
3.8
–
(160.4)
(163.7)
(324.1)
223.6
33.8
(66.6)
(4.8)
186.0
0.2
(7.0)
54.1
(2.3)
231.0
(70.5)
160.5
161.1
(0.6)
160.5
Cents
Cents
29.6
29.6
29.6
29.6
35.2
35.2
35.2
35.2
Annual Report 2022 47
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2022
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Income tax related to these items
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income/(loss) for the year is attributable to:
Owners of nib holdings limited
Charitable foundation
Notes
2022
$m
2021
$m
133.8
160.5
(3.0)
0.5
(2.5)
(0.2)
–
(0.2)
131.3
160.3
133.2
(1.9)
131.3
160.9
(0.6)
160.3
25
8
34
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
48 Annual Report 2022
Consolidated Balance Sheet
as at 30 June 2022
Notes
2022
$m
2021
$m
ASSETS
Current assets
Cash and cash equivalents
Receivables
Financial assets at amortised cost
Financial assets at fair value through profit or loss
Deferred acquisition costs
Current tax assets
Finance lease receivable
Total current assets
Non-current assets
Investments accounted for using the equity method
Deferred acquisition costs
Deferred tax assets
Property, plant and equipment
Intangible assets
Right-of-use assets
Finance lease receivable
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Payables
Borrowings
Claims liabilities
Unearned premium liability
Premium payback liability
Lease liabilities
Provisions and employee entitlements
Current tax liabilities
Total current liabilities
Non-current liabilities
Payables
Borrowings
Unearned premium liability
Premium payback liability
Policy liabilities – life insurance
Lease liabilities
Provisions and employee entitlements
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Retained profits
Reserves
Capital and reserves attributable to owners of nib holdings limited
Charitable foundation
Total equity
9
10
11
11
12
15
34
12
8
13
14
15
15
16
17
18
19
20
15
22
16
17
19
20
21
15
22
8
23
24
25
34
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
206.9
101.5
8.2
1,010.1
47.9
–
2.6
1,377.2
19.2
75.7
27.8
6.9
340.3
23.1
10.2
503.2
213.9
93.9
7.7
870.1
55.0
1.4
1.7
1,243.7
17.8
71.3
–
7.9
325.0
26.5
10.6
459.1
1,880.4
1,702.8
215.7
2.1
300.4
246.8
3.2
7.0
6.7
33.1
815.0
1.2
258.8
24.2
7.2
(7.3)
43.8
3.2
–
331.1
184.3
1.6
217.1
218.1
8.2
6.9
7.6
2.6
646.4
4.3
230.7
31.3
9.5
–
50.7
3.2
20.5
350.2
1,146.1
996.6
734.3
706.2
138.2
589.1
(7.2)
720.1
14.2
734.3
127.2
567.7
(4.8)
690.1
16.1
706.2
Annual Report 2022 49
Consolidated Statement of Changes in Equity
for the year ended 30 June 2022
Attributable to owners of nib holdings limited
Contributed
equity
$m
Retained
profits
$m
Notes
Reserves
$m
Total
$m
Charitable
foundation
$m
Total
equity
$m
Balance at 1 July 2020
121.4
470.5
Profit/(loss) for the year
Movement in foreign currency translation,
net of tax
25
Total comprehensive income/(loss)
for the year
Transactions with owners
in their capacity as owners:
Ordinary shares issued
Shares acquired by the nib Holdings Ltd Share
Ownership Plan Trust
Issue of shares held by nib Holdings Ltd Share
Ownership Plan Trust to employees
Employee performance rights – value of
employee services
Dividends paid
23
23
23
26
–
–
–
4.7
(1.1)
2.2
–
–
5.8
161.1
–
161.1
–
–
–
–
(63.9)
(63.9)
(5.5)
–
(0.2)
(0.2)
–
–
(1.0)
1.9
–
0.9
586.4
16.7
603.1
161.1
(0.2)
160.9
4.7
(1.1)
1.2
1.9
(63.9)
(57.2)
(0.6)
–
(0.6)
–
–
–
–
–
–
160.5
(0.2)
160.3
4.7
(1.1)
1.2
1.9
(63.9)
(57.2)
Balance at 30 June 2021
127.2
567.7
(4.8)
690.1
16.1
706.2
Balance at 1 July 2021
127.2
567.7
(4.8)
690.1
16.1
706.2
Profit/(loss) for the year
Movement in foreign currency translation,
net of tax
25
Total comprehensive income/(loss)
for the year
Transactions with owners
in their capacity as owners:
Ordinary shares issued
Shares acquired by the nib Holdings Ltd Share
Ownership Plan Trust
Issue of shares held by nib Holdings Ltd Share
Ownership Plan Trust to employees
Employee performance rights – value of
employee services
Dividends paid
23
23
23
26
–
–
–
9.0
(0.9)
2.9
–
–
11.0
135.7
–
135.7
–
–
–
–
(114.3)
(114.3)
–
(2.5)
(2.5)
–
–
(1.5)
1.6
–
0.1
135.7
(2.5)
133.2
9.0
(0.9)
1.4
1.6
(114.3)
(103.2)
(1.9)
–
(1.9)
–
–
–
–
–
–
133.8
(2.5)
131.3
9.0
(0.9)
1.4
1.6
(114.3)
(103.2)
Balance at 30 June 2022
138.2
589.1
(7.2)
720.1
14.2
734.3
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
50 Annual Report 2022
Consolidated Statement of Cash Flows
for the year ended 30 June 2022
Cash flows from operating activities
Receipts from policyholders and customers (inclusive of goods and services tax)
Payments to policyholders and customers
Receipts from outwards reinsurance contracts
Payments for outwards reinsurance contracts
Payments to suppliers and employees (inclusive of goods and services tax)
Dividends received
Interest received
Distributions received
Transaction costs relating to acquisition of business
Interest paid
Income taxes paid
Net cash inflow/(outflow) from operating activities
Cash flows from investing activities
Proceeds from disposal of financial assets at fair value through profit or loss
Payments for financial assets at fair value through profit or loss
Proceeds from sale of available-for-sale financial assets
Proceeds from sale of property, plant and equipment and intangibles
Payments for property, plant and equipment and intangibles
Payment for acquisition of business combination, net of cash acquired
Payments for investments in associates and joint ventures
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from borrowings
Principal elements of lease payments
Shares acquired by the nib Holdings Ltd Share Ownership Plan Trust
Dividends paid to the company’s shareholders
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
Reconciliation to Consolidated Balance Sheet
Cash and cash equivalents
Borrowings – overdraft
Notes
2022
$m
2021
$m
2,875.3
2,654.6
(2,016.5)
(2,062.2)
13.6
(21.2)
(459.0)
392.2
0.3
2.6
25.1
(3.3)
(4.4)
(74.9)
337.6
195.8
(380.4)
–
0.1
(26.6)
(39.4)
(8.8)
(259.3)
9.0
30.0
(8.2)
(0.9)
(114.3)
(84.4)
(6.1)
212.3
(1.4)
204.8
206.9
(2.1)
204.8
18.8
(39.8)
(414.7)
156.7
0.2
2.8
15.8
–
(3.2)
(63.6)
108.7
365.8
(373.0)
12.9
0.1
(23.6)
–
(5.7)
(23.5)
4.7
–
(9.0)
(1.1)
(63.9)
(69.3)
15.9
196.0
0.4
212.3
213.9
(1.6)
212.3
33
9
13,14
33
34
9
17
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
Annual Report 2022 51
Notes to the Consolidated Financial Statements
for the year ended 30 June 2022
1. Summary of Significant Accounting Policies
The financial statements are for the consolidated entity consisting
of nib holdings limited and its subsidiaries. nib holdings limited
is a company limited by shares, incorporated and domiciled in
Australia.
The Financial Report was authorised for issue by the Directors
on 19 August 2022. The company has the power to amend and
reissue the Financial Report.
The principal accounting policies adopted in the preparation
of these consolidated financial statements are set out below.
These policies have been consistently applied to all the years
presented, unless otherwise stated.
Significant and other accounting policies that summarise the
measurement basis used and are relevant to the understanding
of financial statements are provided throughout the notes to the
financial statements.
a) Basis of preparation
These general purpose financial statements have been prepared
in accordance with Australian Accounting Standards (and
interpretations issued by the Australian Accounting Standards
Board) and the Corporations Act 2001. nib holdings limited is a
for-profit entity for the purpose of preparing the financial statements.
i) Compliance with IFRS
The consolidated financial statements of nib holdings limited
Group also comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting
Standards Board (IASB).
ii) Historical cost convention
These financial statements have been prepared under the
historical cost convention, as modified by the revaluation of
claims liabilities and financial assets and liabilities at fair value
through profit or loss.
iii) Comparatives
Where necessary, comparative information has been reclassified
to achieve consistency in disclosure with the current year.
b) Principles of consolidation
i) Subsidiaries
The consolidated financial statements incorporate the assets and
liabilities of all subsidiaries of nib holdings limited (“parent entity”)
as at 30 June 2022 and the results of all subsidiaries for the year
then ended. nib holdings limited and its subsidiaries together are
referred to in this financial report as the Group.
Subsidiaries are all entities (including structured entities) over
which the Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from
its involvement with the entity and has ability to affect those
returns through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control
is transferred to the Group. They are deconsolidated from the
date that control ceases.
52 Annual Report 2022
The acquisition method of accounting is used to account for the
acquisition of subsidiaries by the Group.
Intercompany transactions, balances and unrealised gains
on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction
provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries are changed where necessary
to ensure consistency with the policies adopted by the Group.
ii) Associates
Associates are all entities over which the group has significant
influence but not control or joint control. This is generally the
case where the group holds between 20% and 50% of the voting
rights. Investments in associates are accounted for using the
equity method of accounting (see (iii) below), after initially being
recognised at cost.
iii) Equity method
Under the equity method of accounting, the investments are
initially recognised at cost and adjusted thereafter to recognise
the Group’s share of the post-acquisition profits or losses of the
investee in profit or loss, and the Group’s share of movements
in other comprehensive income of the investee in other
comprehensive income. Dividends received or receivable from
associates and joint ventures are recognised as a reduction in the
carrying amount of the investment.
When the Group’s share of losses in an equity-accounted
investment equals or exceeds its interest in the entity, including
any other unsecured long-term receivables, the group does not
recognise further losses, unless it has incurred obligations or
made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its
associates and joint ventures are eliminated to the extent of
the Group’s interest in these entities. Unrealised losses are
also eliminated unless the transaction provides evidence of
an impairment of the asset transferred. Accounting policies of
equity accounted investees have been changed where necessary
to ensure consistency with the policies adopted by the Group.
iv) Changes in ownership interests
The Group treats transactions with non-controlling interests
that do not result in a loss of control as transactions with equity
owners of the Group. A change in ownership interest results in
an adjustment between the carrying amounts of the controlling
and non-controlling interests to reflect their relative interests
in the subsidiary. Any difference between the amount of the
adjustment to non-controlling interests and any consideration
paid or received is recognised in a separate reserve within equity
attributable to owners of nib holdings limited.
When the Group ceases to have control, joint control or
significant influence, any retained interest in the entity is
remeasured to its fair value with the change in carrying amount
recognised in profit or loss. This fair value becomes the initial
carrying amount for the purposes of subsequently accounting for
the retained interest as an associate, jointly controlled entity or
financial asset.
d) Assets backing insurance liabilities
As part of the investment strategy, the Group actively manages
its investment portfolio to ensure that a portion of its investments
mature in accordance with the expected pattern of future cash
flows arising from private health and life insurance liabilities.
The Group has determined that all financial assets of nib health
funds limited, nib nz limited are held to back private health
liabilities, and financial assets of nib nz insurance limited are held
to back the life insurance liabilities. Financial assets that are not
held to back private health insurance and life insurance liabilities
are designated as financial assets at amortised cost.
e) Rounding of amounts
The company is of a kind referred to in Instrument 2016/191,
issued by the Australian Securities and Investments Commission,
relating to the “rounding off” of amounts in the Financial
Report. Amounts in the Financial Report have been rounded
off in accordance with that Instrument to the nearest hundred
thousand dollars, or in certain cases, the nearest dollar.
f) New and amended standards and interpretations
adopted by the Group
The Group has not applied any new standards or amendments
during the annual reporting period commencing 1 July 2021.
c) Foreign currency translation
i) Functional and presentation currency
Items included in the financial statements of each of the Group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (the ’functional
currency’). The consolidated financial statements are presented
in Australian dollars, which is nib holdings limited’s functional and
presentation currency.
ii) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from
the settlement of such transactions and from the translation at
period end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit or loss,
except when they are deferred in equity as qualifying cash flow
hedges and qualifying net investment hedges or are attributable
to part of the net investment in a foreign operation.
Foreign exchange gains and losses that relate to borrowings
are presented in the income statement, within finance costs. All
other foreign exchange gains and losses are presented in the
income statement on a net basis within other income or other
expenses. Non-monetary items that are measured at fair value in
a foreign currency are translated using the exchange rates at the
date when the fair value was determined. Translation differences
on assets and liabilities carried at fair value are reported as
part of the fair value gain or loss. For example, translation
differences on non-monetary assets and liabilities such as
equities held at fair value through profit or loss are recognised in
profit or loss as part of the fair value gain or loss and translation
differences on non-monetary assets such as equities classified
as available-for-sale financial assets are recognised in other
comprehensive income.
iii) Group companies
The results and financial position of foreign operations (none of
which has the currency of a hyperinflationary economy) that have
a functional currency different from the presentation currency are
translated into the presentation currency as follows:
• assets and liabilities for each balance sheet presented
are translated at the closing rate at the date of that
balance sheet;
•
income and expenses for each income statement and
statement of comprehensive income are translated at
average exchange rates (unless this is not a reasonable
approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the
transactions); and
• all resulting exchange differences are recognised in other
comprehensive income.
Goodwill and fair value adjustments arising on the acquisition
of a foreign operation are treated as assets and liabilities of the
foreign operation and translated at the closing rate.
Annual Report 2022 53
Notes to the Consolidated Financial Statements
1. Summary of Significant Accounting Policies continued
g) New accounting standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2022 reporting
periods. The Group does not intend to adopt these standards before its effective date.
The Group’s assessment of the impact of these new standards and interpretations is noted below.
AASB 17 Insurance Contracts
On 19 July 2017, Australian Accounting Standard Board (AASB) issued accounting standard AASB 17 Insurance Contracts (AASB 17).
As a result of amendments made in July 2020, AASB 17 was deferred the effective date to 1 January 2023. The key considerations of
the standard as applicable to nib are summarised below.
Measurement of insurance contracts
Measurement
models
The standard AASB 17 introduces a General Measurement Model (GMM) for the recognition and
measurement of insurance contracts. The GMM involves estimating future cash flows and risks from existing
policies and taking profit to account over the policy period, adjusting the profit over the life of the contract
when actual experience varies from expected.
AASB 17 permits the use of the simplified Premium Allocation Approach (PAA) where either:
•
•
the contract boundary of each contract within the portfolio is one year or less; or
the measurement of the liability for remaining coverage at inception of a contract is not materially
different than if applying GMM.
The PAA operates in a manner similar to the way private health insurance contracts are accounted for under
AASB 1023 General Insurance Contracts (AASB 1023). nib assessed the eligibility of contracts within the
portfolio with one year or less to apply the simplified approach. Work is ongoing however it is anticipated that
nib’s contracts will be eligible for the PAA.
For the life insurance contracts, the measurement model is under assessment.
For the contracts that apply the simplified approach, the Group has the option to expense acquisition costs
as incurred, as opposed to deferring and amortising acquisition costs over the coverage period of the
insurance. Whilst a final decision has not yet been made, the Group is considering adopting the expense as
incurred approach which would result in the write-off of any deferred acquisition costs and associated tax
liabilities to retained profits on implementation.
Onerous
contracts
AASB 17 requires the identification of ’groups’ of onerous contracts which are expected to be determined
at a more granular level of aggregation than the level at which the liability adequacy test is performed under
AASB 1023.
Contracts that are measured using the simplified approach are assumed not to be onerous unless facts
and circumstances indicate otherwise. nib’s preliminary assessment has not identified any material onerous
contracts.
Presentation and disclosure
The standard introduces substantial changes to the presentation and disclosure of insurance line items in
the financial statements, introducing new line items on the balance sheet and statement of comprehensive
income and increased disclosure requirements compared with existing reporting requirements.
Existing insurance and reinsurance contract line items on the balance sheet (including premium receivable,
unearned premium liability, deferred acquisition costs, gross outstanding claims and reinsurance and
other recoveries on outstanding claims) will be replaced with insurance contract assets and liabilities, and
reinsurance contract assets and liabilities.
54 Annual Report 2022
for the year ended 30 June 2022 Transition
Financial impact
Implementation progress
AASB 17 will be applied retrospectively to all of nib’s insurance contracts on transition except to the extent
that it is impracticable to do so, in which case either a modified retrospective or fair value approach may be
applied.
nib is currently performing an assessment to conclude on the expected transition approach to be applied for
the business.
Market developments continue to be monitored in order to assess the impact of evolving interpretations and
other changes. An example of such evolving interpretations is the ongoing applicability of the Provision for
deferred and suspended claims on transition to AASB 17.
The financial impact of adopting AASB 17 cannot be reasonably estimated at the date of this report. The
Group intends to disclose the potential financial impact of adopting AASB 17 once it is practical to provide a
reliable estimate.
The Group, being the Ultimate Parent nib holdings limited and its subsidiaries, has formed a project team to
assess the impact of this change on the operations and financial statements of the business.
The Group is also a member of the PHI industry and AASB 17 Insurance Contracts Transition Resource
Group (TRG).
Initial investigation into the application for the standard indicates it is likely that the Premium Allocation
Approach will apply to the Group’s insurance contracts. This will simplify the implementation of the standard
as minimal modifications to IT systems will be required.
2. Critical Accounting Judgements and Estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to
exercise its judgment in the process of applying the Group’s accounting policies.
The Group makes estimates and assumptions in respect of certain key assets and liabilities. Estimates and judgments are continually
evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances.
The COVID-19 pandemic has impacted the Group’s assessment of these assumptions and forward looking estimates, and
management have accordingly adjusted them to reflect the change in risk. Specifics of the impact on estimates are detailed in
each note.
The key areas in which critical estimates are applied are:
Note 12
Deferred acquisition costs
Note 14
Goodwill and indefinite life intangibles impairment and useful life of brand names and trademarks
Note 18
Claims liabilities – Outstanding claims liability and Provision for deferred and suspended claims
Note 19
Liability adequacy test
Note 20
Premium payback liabilities
Note 21
Policy liabilities – life insurance
Annual Report 2022 55
Notes to the Consolidated Financial Statements
3. Risk Management
The Board of nib is ultimately responsible for the Group’s risk management framework and oversees the Group’s operations by
ensuring that management operates within the approved risk appetite statement. The Board approved the Group’s overall risk
management strategy, risk appetite and policies and practices to ensure that risks are identified and managed within the context of
this appetite.
The Board’s sub committees, including the Audit Committee, Investment Committee and the Risk and Reputation Committee assist
the Board in the execution of its responsibilities. The responsibilities of these Committees are detailed in their respective Charters.
The Group’s risk management framework is based on a three lines model and provides defined risk ownership responsibilities with
functionally independent oversight and assurance. The Group manages risks through:
•
•
the governance structure established by the Board,
implementation of the risk management framework by management,
• oversight of the risk management framework by the Risk function and the Management Risk Committee,
•
•
the Group’s internal policies and procedures designed to identify and mitigate risks,
internal audit which provides independent assurance to the Board regarding the appropriateness, effectiveness and adequacy
of controls over activities where risks are perceived to be high,
•
regular risk and compliance reporting to the Board and relevant Board Committees,
• application of solvency and capital adequacy standards for nib health funds limited (regulated by APRA) and nib New Zealand
(regulated by RBNZ).
The Group’s objective is to manage the Group’s risks in line with the Board approved risk appetite statement. Various procedures are
in place to identify, mitigate and monitor the risks faced by the Group. Management are responsible for understanding and managing
risks, including financial and non-financial risks. The Group’s exposure to all high and critical risks, and other key enterprise risks,
is reported quarterly to the Board via the Risk and Reputation Committee.
During the year the Group continued to invest in and strengthen our risk management systems and practices to reflect our strong
commitment to risk and compliance in alignment with APRA Prudential Standard CPS 220 – Risk Management.
The financial condition and operations of the Group are affected by a number of Principal Risks and Uncertainties. High level
descriptions of these risks are included in the Operating and Financial Review (see pages 3 to 13), including Insurance Risks, Financial
Risks, Strategic Risks and Operational Risks as categorised in nib’s Risk Management Strategy. Realisation of these risks can have
both financial and/or non-financial impacts.
Similarly to the last 2 years, the impact of the COVID-19 pandemic on the global economy has continued to result in ongoing
insurance and financial risk exposure for the Group. This heightened level of uncertainty and risk is managed as part of the Group’s
Risk Management Framework.
Further material is contained in the notes below on the exposures and mitigation of specific risks with discrete financial impacts.
Category
Risks
Insurance risks
Pricing
Claims inflation
Risk equalisation (Australia only)
Financial risks
Fair value interest rate risk
Foreign exchange risk
Price risk
Credit risk
Liquidity risk
Capital management (see Note 28)
56 Annual Report 2022
for the year ended 30 June 2022 a) Insurance risk
Insurance risk is the risk that inadequate or inappropriate underwriting, claims management, product design and pricing will expose
the Group to financial loss from claims expenditure exceeding the amount implicit in premium income.
There are a number of sources of risk that require nib to closely review and monitor our control strategies. These risks have Board
oversight. These sources include:
Description
Exposure
Mitigation
Pricing risk
Claims inflation
Forecasting and pricing is a core capability within the
Group. Without effective controls there is potential for poor
quality forecasting. This could result in a range of negative
outcomes, including: pricing decisions that do not align
with nib strategic goals, material impact to nib financial
performance, and failure to comply with ASX Listing
Rule Continuous Disclosure obligations. Control failures
could also impact annual pricing approval decisions by
the Minister for Health. Amendments or rejections of
price applications could have a negative impact on nib’s
operating and financial performance.
The Group is subject to the risk of significant claims
inflation which may not be adequately covered by premium
price increases and/or product design changes.
In Australia the principle of community rating prevents
private health insurers from improperly discriminating
between people who are or wish to be insured, on the
basis of their health status, age, race, gender, religious
beliefs, sexuality, frequency of need of health care, lifestyle
or claims history.
This risk is managed by establishing product
premiums through the use of actuarial models
based on historical claims costs and forecast
claims inflation.
Pricing recommendations are reviewed by the
Appointed Actuary.
The Group works collaboratively with
Government, regulators and other stakeholders
to improve health insurance premium
affordability through industry reforms and health
policy setting.
Claims patterns are monitored and premiums
calculated accordingly.
Governance, contractual and control
procedures are in place for key benefits &
provider relationships.
Maintenance of reserves in excess of minimum
solvency and capital requirements allows the
Group to withstand increased levels of claims
inflation.
Risk equalisation
special account
arrangements
Risk equalisation arrangements apply to the registered
health insurance industry in Australia. Under these
arrangements all registered health insurers effectively
provide reinsurance support so that the industry as a whole
shares the hospital cost of high risk groups irrespective of
the policyholder or private health fund related to the claim.
Risk equalisation provides some protection to
high cost claims however exposes the Group
to claims from other health insurers. Actuarial
models are used to monitor past experience
and predict future costs, premiums are
calculated accordingly.
b) Fair value interest rate risk
Description
Exposure
Mitigation
Risk of
fluctuations in
interest rates
impacting the
Group’s financial
performance or
the fair value
of its financial
instruments.
The Group has interest rate risk arising from long-term
borrowings. Borrowings issued at variable rates expose the
Group to cash flow interest rate risk. Borrowings issued
at fixed rates expose the Group to fair value interest rate
risk if the borrowings are carried at fair value. The Group’s
borrowings at variable rate were denominated in Australian
and New Zealand Dollars.
The Group’s other interest rate risks arise from:
•
receivables;
• financial assets at amortised cost;
• financial assets at fair value through profit or loss; and
• cash and cash equivalents.
All other receivables are non-interest bearing. There is an
interest-bearing component of financial assets at fair value
through profit or loss.
The Group mitigates interest rate risk on long
term borrowings by maintaining an appropriate
gearing ratio and monitoring and forecasting
key indicators such as interest expense
coverage.
nib has a defined investment strategy and risk/
return objectives, that is aligned to the strategic
plan and capital management plans, overseen
by the Investment Committee and assisted by
asset management consultants.
Annual Report 2022 57
Notes to the Consolidated Financial Statements
3. Risk Management continued
b) Fair value interest rate risk continued
As at the end of the reporting period, the Group had the following variable rate borrowings outstanding:
Bank loans
Net exposure to cash flow interest rate risk
2022
2021
Weighted
average
interest rate
%
1.6%
Weighted
average
interest rate
%
1.5%
Balance
$m
258.8
258.8
Balance
$m
230.7
230.7
The bank overdraft comprised of the closing positive balance of the bank account, adjusted for unpresented cheques and outstanding
deposits is not included in bank loans.
The Group’s sensitivity to interest rate risk has increased with the COVID-19 associated economic impact. The Group has shown the
impact of a change in interest rates of 100 bps to reflect this increased risk. An analysis by maturities is provided at 3(f). The table
below summarises the sensitivity of the Group’s financial assets and financial liabilities to interest rate risk.
Interest rate risk
-100bps
+100bps
-100bps
+100bps
2022
2021
Financial assets
Cash and cash equivalents
Other receivables
Financial assets at amortised cost
Financial assets at fair value through profit or loss
Financial liabilities
Bank loans
Premium payback liability
c) Foreign exchange risk
Description
Exposure
Carrying
amount
$m
Profit after tax/
equity
$m
Profit after tax/
equity
$m
Carrying
amount
$m
Profit after tax/
equity
$m
Profit after tax/
equity
$m
206.9
30.8
8.2
1,010.1
(258.8)
(10.4)
(1.5)
(0.2)
0.1
9.3
1.9
(0.2)
1.5
0.2
(0.1)
(9.2)
(1.9)
0.2
213.9
27.4
7.7
870.1
(230.7)
(17.7)
(1.5)
(0.2)
0.1
8.1
1.7
(0.5)
1.5
0.2
(0.1)
(8.1)
(1.7)
0.6
Mitigation
The Group does not hedge this risk.
Risk of
fluctuations
in foreign
exchange rates
impacting the
Group’s financial
performance.
The Group operates internationally and is exposed to
foreign exchange risk arising from foreign currency
translation risk through its subsidiaries located in
overseas jurisdictions.
In accordance with the policy set out in Note 1(c),
foreign exchange gains or losses arising on translation
of the Group’s foreign operations to the Group’s
Australian dollar presentation currency are recognised
in equity through other comprehensive income.
Foreign exchange gains or losses arising on assets
and liabilities denominated in foreign currencies are
recognised directly in profit and loss.
58 Annual Report 2022
for the year ended 30 June 2022 The table below summarises the sensitivity of the Group’s equity to a 10% strengthening and weakening of the Australian dollar
against the foreign currency, with all other variables held constant.
-10%
Profit
after tax
$m
–
(0.7)
(0.7)
Exposure
$m
123.6
10.6
2.3
2022
Equity
$m
(12.3)
–
0.7
+10%
Profit
after tax
$m
–
0.7
0.7
Equity
$m
12.3
–
(0.7)
Exposure
$m
75.4
12.3
4.1
-10%
Profit
after tax
$m
–
(0.9)
(0.8)
2021
Equity
$m
(7.5)
–
0.8
+10%
Profit
after tax
$m
–
0.9
0.8
Equity
$m
7.5
–
(0.8)
Foreign exchange risk
New Zealand dollar
Chinese Yuan
Other
d) Price risk
Description
Exposure
Mitigation
The Group is exposed to equity securities price risk.
This arises from investments held by the Group and
classified on the balance sheet as at fair value through
profit or loss. The Group is not exposed to commodity
price risk.
Risk of
fluctuations in
price of equity
securities
impacting the
Group’s fair value
of its financial
instruments.
To manage its price risk the Group has adopted
an investment strategy which delivers a diversified
portfolio with a heavier weighting to defensive
assets versus growth assets.
nib has a defined investment strategy and risk/
return objectives, that is aligned to the strategic
plan and capital management plans, overseen by
the Investment Committee and assisted by asset
management consultants.
The Group’s increased risk relating to the price of equity securities in volatile markets as a result of COVID-19 is mitigated by the
heavier weighting of the Group’s investments to defensive assets versus growth assets.
Profit after tax for the year would increase/decrease as a result of gains/losses on equity securities classified as at fair value through
profit or loss. All the equity securities are held in unit trusts. The table below summarises the sensitivity of the Group’s financial assets
to price risk.
Other price risk
-10% unit price +10% unit price
-10% unit price +10% unit price
2022
2021
Financial assets
Financial assets at fair value through profit or loss
1,010.1
(15.2)
15.2
870.1
(15.8)
15.8
Carrying
amount
$m
Profit after tax/
equity
$m
Profit after tax/
equity
$m
Carrying
amount
$m
Profit after tax/
equity
$m
Profit after tax/
equity
$m
Methods and assumptions used in preparing sensitivity analysis
The after tax effect on profit and equity of movements in foreign exchange, interest rate and price have been calculated using
‘reasonably possible’ changes in the risk variables, based on recent interest rate and market movements.
An interest rate change of 100 basis points will directly affect interest received on cash and cash equivalents and other receivables.
An interest rate change of 100 basis points will inversely affect the unit price of fixed interest investments. This change has been
calculated by multiplying the average duration of underlying investments in each portfolio by the interest rate change. All other
investments are not directly affected by interest rate changes but would be revalued through profit or loss as their unit price changes.
Annual Report 2022 59
Notes to the Consolidated Financial Statements
3. Risk Management continued
e) Credit risk
Description
Exposure
Mitigation
Risk that a
counterparty
will default on
its contractual
obligations, or
the decline in
the credit quality
of a financial
instrument,
resulting in
financial loss to
the Group.
Credit risk arises from:
• cash and cash equivalents;
• financial assets and deposits with banks and
financial institutions; and
• credit exposures to policyholders and the
Department of Human Services (Private Health
Insurance Premiums Reduction Scheme).
The maximum exposure to credit risk, excluding the
value of any collateral or other security, at balance
date is the carrying amount, net of any provisions for
impairment loss, as disclosed in the balance sheet and
notes to the financial statements. Apart from Services
Australia the Group does not have any material credit
risk to any other single debtor or group of debtors
under financial instruments entered into.
Directly managed term deposits are held with
institutions that have at least an A-2 credit rating.
Term deposits held within portfolios managed by
investment asset consultants are in accordance
with the relevant investment policy statement.
nib has a defined investment strategy and risk/
return objectives, that is aligned to the strategic
plan and capital management plans, overseen by
the Investment Committee and assisted by asset
management consultants.
Credit risk for premium receivables are minimal due
to the diversification of policyholders. The Private
Health Insurance Premiums Reduction Scheme
receivable is due from a government organisation
under legislation.
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings
(if available) or to historical information about counterparty default rates.
The Group’s credit risk assessments and loss allowances have been updated for the increased risk of default as a result of the
COVID-19 pandemic.
Other receivables
Counterparties with external credit rating
Group 1 – new debtors (relationship less than 6 months)
Group 2 – existing debtors with no defaults in the past
Group 3 – existing debtors with some defaults in the past. All defaults were fully recovered.
Cash at bank and short-term bank deposits
A-1+
A-1
A-2
B*
* Transactional bank account.
Financial assets at amortised cost
Short term deposits
A-1+
60 Annual Report 2022
2022
$m
2.9
0.5
27.3
0.1
30.8
2022
$m
187.3
17.1
0.9
1.6
2021
$m
5.0
0.2
21.8
0.4
27.4
2021
$m
197.8
13.5
1.0
1.6
206.9
213.9
2022
$m
8.2
8.2
2021
$m
7.7
7.7
for the year ended 30 June 2022
Financial assets at fair value through profit or loss
Interest-bearing securities1
AAA
AA
A
BBB
2022
$m
307.4
466.4
9.3
9.2
792.3
2021
$m
215.5
364.3
52.7
13.2
645.7
1. The financial assets at fair value through profit or loss with credit risk are held in unit trusts. The above table summarises the underlying investments of the unit trusts.
f) Liquidity risk
Description
Exposure
Mitigation
Risk that the Group will
not be able to meet its
financial obligations as
they fall due, because
of lack of liquid assets
or access to funding on
acceptable terms.
Liquidity risk arises from:
•
trade creditors;
• claims payable;
• other payables;
•
lease liabilities; and
• borrowings
The Group manages liquidity risk by continuously
monitoring forecast and actual cash flows and holding
a high percentage of highly liquid investments.
The bank overdraft within borrowings comprises the
closing positive balances of the bank account, adjusted
for unpresented cheques and outstanding deposits.
There are no overdraft facilities.
Maturities of financial liabilities
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the
reporting date to the contractual maturity date. The amounts disclosed are the contractual undiscounted cash flows.
Group at 30 June 2022
Financial Liabilities
Trade creditors
Claims payable
Other payables
Lease liabilities
Borrowings
Group at 30 June 2021
Financial Liabilities
Trade creditors
Claims payable
Other payables
Lease liabilities
Borrowings
< 1 month
$m
1-3 months
$m
3-12 months
$m
1-5 years
$m
> 5 years
$m
28.7
62.1
33.3
0.8
0.3
125.2
0.5
–
19.6
1.6
1.8
23.5
–
–
6.0
7.0
6.3
19.3
–
–
2.1
35.9
267.3
305.3
–
–
–
14.6
–
14.6
< 1 month
$m
1-3 months
$m
3-12 months
$m
1-5 years
$m
> 5 years
$m
15.0
55.4
28.5
0.8
0.1
99.8
5.2
–
12.9
1.6
0.7
20.4
0.6
–
6.9
7.2
2.5
17.2
–
–
5.1
36.5
234.5
276.1
–
–
–
23.3
–
23.3
Total
contractual
cash flows
$m
29.2
62.1
61.0
59.9
275.7
487.9
Total
contractual
cash flows
$m
20.8
55.4
53.4
69.4
237.8
436.8
Carrying
amount
$m
29.2
62.1
61.0
50.8
260.9
464.0
Carrying
amount
$m
20.8
55.4
53.4
57.6
232.3
419.5
Annual Report 2022 61
Notes to the Consolidated Financial Statements
4. Fair Value Measurement
a) Fair value hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are
recognised and measured at fair value in the financial statements. To provide an indication about the reliability of the inputs used in
determining fair value, the Group classifies its financial instruments into the three levels prescribed under the accounting standards.
An explanation of each level follows below the table.
The following tables present the Group’s assets and liabilities measured and recognised at fair value at 30 June 2022 and
30 June 2021:
Group at 30 June 2022
Assets
Receivables
Financial assets at fair value through profit or loss
Equity securities
Interest-bearing securities
Property trusts1
Finance lease receivable
Total assets
of which: Investments relating to life insurance business – Interest-bearing securities
Level 1
$m
Level 2
$m
Level 3
$m
–
1.0
206.3
738.8
–
–
945.1
–
–
50.4
11.5
12.8
75.7
16.2
–
–
3.1
–
–
3.1
–
1. Level 3 investment in Unlisted property trusts were redeemed during the period and invested in Level 2 Unlisted property trusts.
Group at 30 June 2021
Assets
Receivables
Financial assets at fair value through profit or loss
Equity securities
Interest-bearing securities
Property trusts
Finance lease receivable
Total assets
Level 1
$m
Level 2
$m
Level 3
$m
–
1.0
213.2
605.2
–
–
818.4
–
39.2
–
12.3
52.5
–
–
1.3
11.2
–
12.5
Total
$m
1.0
206.3
792.3
11.5
12.8
1,023.9
16.2
Total
$m
1.0
213.2
645.7
11.2
12.3
883.4
The carrying value less impairment provision of other receivables and payables are assumed to approximate their fair values due to
their short-term nature.
There were no transfers between level 1, 2 and 3 during the year.
The Group’s policy is to recognise transfers into and transfers out of the fair value hierarchy levels as at the end of the reporting period.
Level 1
Level 2
The fair value of financial instruments traded in active markets (such as financial assets at fair value through
profit or loss) is based on quoted market prices at the reporting date.
The fair value of financial instruments that are not traded in active markets (for example some interest bearing
securities) is determined using valuation techniques. The Group uses a variety of methods and makes
assumptions that are based on market conditions existing at each balance date.
Level 3
One or more of the significant inputs is not based on observable market data.
62 Annual Report 2022
for the year ended 30 June 2022 b) Valuation techniques used to determine fair values
Specific valuation techniques used to value financial instruments include:
• The use of quoted market prices or dealer quotes for similar instruments.
• Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial
instruments.
All of the resulting fair value estimates for financial instruments are included in level 2.
In the circumstances where a valuation technique for financial instruments is based on significant unobservable inputs, those
instruments are included in level 3. For the Group, this includes the valuation of interest bearing securities.
c) Fair value measurements using significant unobservable inputs (level 3)
The Group’s level 3 investments comprise units in interest bearing securities which are infrequently traded. The following table
presents the changes in level 3 instruments for the year ended 30 June 2022 and 30 June 2021:
Fair value measurement as at 1 July
Purchased
Sales
Change in fair value
Exchange differences
Fair value measurement at end of period
2022
$m
12.5
3.8
(13.3)
0.4
(0.3)
3.1
2021
$m
10.5
1.8
(0.6)
0.7
0.1
12.5
i) Transfers between
levels 2 and 3
There were no transfers between the levels of the fair value hierarchy during the year. There were
also no changes during the year to any of the valuation techniques applied as of 30 June 2021.
ii) Valuation process
The valuation of interest bearing securities is based on unit prices provided by investment
managers.
The following table summarises the quantitative information about the significant unobservable inputs used in level 3 fair value
measurements:
Description
At 30 June 2022
Fair value
$m Unobservable inputs
Relationship of unobservable inputs to fair value
Interest-bearing securities
3.1 Redemption price
Higher/(lower) redemption price (+/- 10%) would
increase/(decrease) fair value by $0.3m
At 30 June 2021
Interest-bearing securities and Unlisted
property trusts
12.5 Redemption price
Higher/(lower) redemption price (+/- 10%) would
increase/(decrease) fair value by $1.3m
Annual Report 2022 63
Notes to the Consolidated Financial Statements
5. Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to Executive management. The chief
operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has
been identified as the Managing Director/Chief Executive Officer (MD/CEO).
The MD/CEO assesses the performance of the operating segments based on underlying operating profit. This measurement basis
excludes from the operating segments the effects of income and expenditure such as integration costs, merger and acquisition costs,
new business implementation costs, amortisation of acquired intangibles and impairment of intangibles.
No information regarding assets, liabilities and income tax is provided for individual Australian Residents Health Insurance and
International (Inbound) Health Insurance segments to the MD/CEO. Furthermore, investment income and expenditure for Australia is
not allocated to individual Australian segments as this type of activity is driven by the central treasury function, which manages the
cash position of the Australian companies.
Management has determined the operating segments based on the reports reviewed by the MD/CEO that are used to make
strategic decisions.
The MD/CEO considers the business from both a geographic and product perspective and has identified four reportable segments:
Australian
Residents Health
Insurance
New Zealand
Insurance
International
(Inbound) Health
Insurance
nib’s core product offering within the Australian private health insurance industry, including Australian Payer
to Partner (P2P) product offering and commission from other insurance products
nib’s product offerings within the New Zealand private health and life insurance industry
nib’s offering of health insurance products for international students and workers
nib Travel
nib’s distribution of travel insurance products
“Unallocated to segments” includes corporate expenses, share of profit/(loss) from joint ventures, and the charitable foundation as
they do not meet the quantitative requirements for reportable segments. Commission of other insurance products was allocated to
the Australian Residents Health Insurance segment in this financial year.
64 Annual Report 2022
for the year ended 30 June 2022 For the year ending 30 June 2022
International
(Inbound)
Health
Insurance
$m
New Zealand
Insurance
$m
nib Travel
$m
Unallocated
to segments
$m
3.6
(1.9)
1.7
(0.9)
0.9
–
–
–
(0.2)
(0.2)
–
–
(1.6)
(0.2)
(1.8)
(0.3)
46.6
(53.7)
–
(7.4)
Premium revenue
Outwards reinsurance premium expense
Net premium revenue
Claims expense
Reinsurance and other recoveries revenue
RESA
State levies
(Increase)/decrease in premium payback liability
Claims handling expenses
Net claims incurred
Other underwriting revenue
Movement in policy liabilities
Acquisition costs
Other underwriting expenses
Australian
Residents
Health
Insurance
$m
2,295.5
(9.3)
2,286.2
(1,544.4)
4.4
(228.7)
(39.1)
–
(12.5)
(1,820.3)
3.9
–
(117.3)
(114.5)
133.3
(9.6)
123.7
(91.1)
5.3
–
–
–
(3.4)
(89.2)
2.6
–
(11.7)
(26.5)
293.0
(1.2)
291.8
(180.7)
0.9
–
–
7.1
(2.6)
(175.3)
(0.1)
(0.3)
(52.5)
(40.9)
Underlying underwriting expenses
(231.8)
(38.2)
(93.7)
Underlying underwriting result
238.0
(1.1)
22.7
Other income
Other expenses
Share of net profit/(loss) of associates and joint
ventures accounted for using the equity method
2.8
(0.3)
–
–
–
–
–
–
–
Underlying operating profit/(loss)
240.5
(1.1)
22.7
Items not included in underlying operating profit
Amortisation of acquired intangibles
(1.9)
(0.8)
(3.4)
(1.6)
Impairment of intangibles
One-off transactions, merger, acquisition and new
business implementation costs
–
–
–
–
–
–
–
–
Finance income
Finance costs
Investment income
Investment expenses
Profit before income tax from continuing operations
Inter-segment other income1
Depreciation and amortisation
0.1
2.6
–
1.4
Total assets
Total liabilities
Insurance liabilities
Claims liabilities
Unearned premium liability
Premium payback liability
Policy liabilities – life insurance
Total insurance liabilities
1,367.4
761.9
278.0
247.9
–
–
525.9
1. Inter-segment other income is eliminated on consolidation and not included in operating profit.
0.1
3.4
267.3
69.2
22.0
22.3
10.4
(7.3)
47.4
–
1.6
141.5
21.8
0.4
0.8
–
–
1.2
Total
$m
2,725.4
(22.0)
2,703.4
(1,817.1)
11.5
(228.7)
(39.1)
7.1
(18.7)
(2,085.0)
6.4
(0.3)
(183.1)
(182.1)
(365.5)
259.3
51.5
(68.2)
(7.3)
235.3
(7.7)
–
(0.1)
0.3
(7.0)
(27.3)
(2.7)
190.8
0.2
28.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.1
(14.2)
(7.3)
(19.4)
–
–
(0.1)
0.3
(7.0)
(27.3)
(2.7)
–
19.3
104.2
293.2
1,880.4
1,146.1
–
–
–
–
–
300.4
271.0
10.4
(7.3)
574.5
Annual Report 2022 65
For the year ending 30 June 2021
International
(Inbound)
Health
Insurance
$m
New Zealand
Insurance
$m
nib Travel
$m
Unallocated
to segments
$m
Notes to the Consolidated Financial Statements
5. Segment Reporting continued
Premium revenue
Outwards reinsurance premium expense
Net premium revenue
Claims expense
Reinsurance and other recoveries revenue
RESA
State levies
(Increase)/decrease in premium payback liability
Claims handling expenses
Net claims incurred
Other underwriting revenue
Acquisition costs
Other underwriting expenses
Underlying underwriting expenses
Australian
Residents
Health
Insurance
$m
2,185.0
(10.9)
2,174.1
(1,496.1)
4.9
(213.8)
(36.0)
–
(12.6)
(1,753.6)
1.8
(106.0)
(104.5)
(210.5)
135.6
(20.1)
115.5
(96.2)
10.4
–
–
–
(4.1)
(89.9)
2.0
(12.3)
(21.2)
(33.5)
258.9
(0.3)
258.6
(161.0)
–
–
–
2.3
(2.5)
(161.2)
–
(41.6)
(31.7)
(73.3)
Underlying underwriting result
211.8
(5.9)
24.1
Other income
Other expenses
Share of net profit/(loss) of associates and joint
ventures accounted for using the equity method
Underlying operating profit/(loss)
Amortisation of acquired intangibles
Impairment of acquired intangibles
One-off transactions, merger, acquisition and new
business implementation costs
Gain on sale of investment in joint venture
Finance income
Finance costs
Investment income
Investment expenses
Profit before income tax from continuing operations
2.8
(0.4)
–
214.2
(1.9)
–
–
–
–
–
–
–
(5.9)
(0.8)
–
–
–
–
Inter-segment other income1
Depreciation and amortisation
0.1
2.6
–
1.7
Total assets
Total liabilities
Insurance liabilities
Claims liabilities
Unearned premium liability
Premium payback liability
Total insurance liabilities
1,196.3
628.9
201.6
227.7
–
429.3
1. Inter-segment other income is eliminated on consolidation and not included in operating profit.
66 Annual Report 2022
–
–
–
24.1
(3.4)
–
–
–
–
0.1
3.4
223.3
76.4
15.4
21.4
17.7
54.5
Total
$m
2,580.8
(32.0)
2,548.8
(1,753.9)
15.9
(213.8)
(36.0)
2.3
(19.4)
(2,004.9)
3.8
(160.4)
(157.6)
(318.0)
229.7
24.1
(44.1)
(4.8)
204.9
(8.0)
(8.8)
(11.8)
9.7
0.2
(7.0)
54.1
(2.3)
231.0
0.2
26.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7.3
(16.4)
(4.8)
(13.9)
–
–
(11.8)
9.7
0.2
(7.0)
54.1
(2.3)
–
17.1
137.1
258.4
1,702.8
996.6
–
–
–
–
217.1
249.4
17.7
484.2
1.3
(0.7)
0.6
(0.6)
0.6
–
–
–
(0.2)
(0.2)
–
(0.5)
(0.2)
(0.7)
(0.3)
14.0
(27.3)
–
(13.6)
(1.9)
(8.8)
–
–
–
–
1.9
146.1
32.9
0.1
0.3
–
0.4
for the year ended 30 June 2022 6. Revenue and Other Income
Premium revenue
Health insurance business
Travel insurance business
Life insurance business
Outwards reinsurance premiums
Health insurance business
Travel insurance business
Life insurance business
Net premium revenue
Agency fee
Sundry income
Other underwriting revenue
Travel insurance commission
Commission on other insurance products
Gain on sale of investment in joint venture
Wages subsidies
Insurance recoveries
Sundry income
Other income
Finance income
Interest
Net realised gain (loss) on financial assets at fair value through profit or loss
Net unrealised gain (loss) on financial assets at fair value through profit or loss
Dividends
Investment income
Notes
2022
$m
2021
$m
21
21
2,725.4
2,718.2
2,580.8
2,579.5
3.6
3.6
(22.0)
(19.1)
(1.9)
(1.0)
1.3
–
(32.0)
(31.3)
(0.7)
–
2,703.4
2,548.8
0.4
6.0
6.4
0.3
3.5
3.8
46.2
12.5
2.8
2.0
0.2
0.1
2.9
2.8
9.7
4.2
0.1
4.5
54.2
33.8
0.3
0.2
2.6
31.6
(61.8)
0.3
(27.3)
2.8
20.3
30.8
0.2
54.1
Annual Report 2022 67
Notes to the Consolidated Financial Statements
6. Revenue and Other Income continued
a) Accounting policy
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of amounts
collected on behalf of third parties.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits
will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The Group bases its
estimates on historical results, taking into account the type of customer, the type of transaction and the specifics of each arrangement.
Revenue is recognised for the major business activities as follows:
i) Premium revenue
Premium revenue comprises premiums from private health insurance contracts and life insurance
contracts held by policyholders.
Private health insurance contracts
Premium revenue is recognised when it has been earned. Premium revenue is recognised from
the attachment date over the period of the contract. The attachment date is from when the
insurer accepts the risk from the insured under the insurance contract. Revenue is recognised in
accordance with the pattern of the incidence of risk expected over the term of the contract.
The proportion of the premium received or receivable not earned in the income statement at the
reporting date is recognised in the balance sheet as an unearned premium liability. Any non-current
portion is discounted based on expected settlement dates.
Premiums on unclosed business are brought to account using estimates based on payment cycles
nominated by the policyholder.
Life insurance contracts
Premium revenue is earned on life insurance contracts. Premiums with a regular due date are
recognised as revenue when they fall due. The premium amounts received are recognised as an
increase in policy liabilities. Premiums due after but received before the end of the financial year are
shown as unearned premium liabilities in the Consolidated Balance Sheet.
ii) Investment income
Net fair value gains or losses on financial assets classified as at fair value through profit or loss are
recognised in the period.
Interest income is recognised using the effective interest method. Refer to Note 10(a)(iii) for
impairment of financial assets.
iii) Outwards reinsurance
Premiums ceded to reinsurers under insurance contracts held by the Group are recognised as an
outwards reinsurance expense and are recognised in the income statement from the attachment
date over the period of indemnity of the reinsurance contract in accordance with the expected
pattern of the incidence of risk ceded.
iv) Income from travel
insurance commission
Income in the form of commissions is recognised when the sale of an insurance policy to a
customer occurs. Income is also generated on travel services activities and recognised as the
service is performed.
v) Finance income
Finance income on sublease is allocated to accounting periods so as to reflect a constant period
rate of return on the Group’s finance lease. Refer to Note 15 for finance lease receivables.
68 Annual Report 2022
for the year ended 30 June 2022 7. Expenses
Expenses by function
Claims handling expenses
Acquisition costs
Other underwriting expenses
Other expenses
Finance costs
Investment expenses
Notes
2022
$m
2021
$m
18.7
183.1
188.2
72.6
7.0
2.7
19.4
160.4
163.7
66.6
7.0
2.3
Total expenses (excluding direct claims expenses)
472.3
419.4
Expenses by nature
Amortisation of acquired intangibles
Bank charges
Communications, postage and telephone expenses
Depreciation and amortisation
Depreciation of right-of-use assets
Impairment of right-of-use-assets
Employee costs
Finance costs
Finance costs – interest on lease liabilities
Impairment of acquired intangibles
Information technology expenses
Investment expenses
Marketing expenses – excluding commissions
Marketing expenses – commissions
Merger, acquisition and new business implementation costs
Professional fees
Other expenses
Total expenses (excluding direct claims expenses)
15
15
15
7.7
4.9
4.1
20.6
3.4
–
8.0
3.0
4.8
18.7
5.3
1.1
160.1
150.9
4.4
2.6
–
28.5
2.7
45.8
3.4
3.6
8.8
27.7
2.3
35.7
137.0
104.4
2.9
32.7
14.9
0.3
27.4
14.0
472.3
419.4
Annual Report 2022 69
Notes to the Consolidated Financial Statements
8. Taxation
a) Income tax
i) Income tax expense
Recognised in the income statement
Current tax expense
Deferred tax expense
Under (over) provided in prior years
Income tax expense is attributable to:
Profit from continuing operations
Aggregate income tax expense
Deferred income tax expense included in income tax expense comprises:
(Increase)/decrease in deferred tax assets
Increase/(decrease) in deferred tax liabilities
8(b)
8(c)
ii) Numerical reconciliation of income tax expense to prima facie tax payable
Profit from continuing operations before income tax expense
Tax at the Australian tax rate of 30% (2021: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Goodwill impairment
Sundry items
Net assessable trust distributions
Imputation credits and foreign tax credits
Adjustment for current tax of prior periods
Differences in foreign tax rates
Income tax expense
iii) Tax expense relating to items of other comprehensive income
Foreign currency translations
70 Annual Report 2022
Notes
2022
$m
2021
$m
107.7
(50.0)
(0.7)
57.0
57.0
57.0
(40.8)
(9.2)
(50.0)
42.8
28.2
(0.5)
70.5
70.5
70.5
29.2
(1.0)
28.2
190.8
231.0
57.2
69.3
–
1.5
0.7
(2.2)
(0.7)
0.5
57.0
(0.5)
(0.5)
2.3
(0.4)
0.2
(0.7)
(0.5)
0.3
70.5
–
–
for the year ended 30 June 2022
b) Deferred tax assets
The balance comprises temporary differences attributable to:
Notes
Claims liabilities
Employee benefits
Lease liabilities
Unearned premium liability
Premium payback liabilities
Provisions
Unrealised losses on investments
Other
Depreciation and amortisation
Loss allowance
Income receivables
Investment in associates and joint ventures
Share issue costs
Tax losses
Total deferred tax assets
Set-off of deferred tax liabilities pursuant to set-off provisions
8(c)
Net deferred tax assets
Recovery of total deferred tax assets:
Deferred tax assets to be recovered within 12 months
Deferred tax assets to be recovered after more than 12 months
Claims
liabilities
$m
Employee
benefits
$m
Lease
liabilities
$m
Unearned
premium
liability
$m
Premium
payback
liability
$m
Unrealised
losses on
investments
$m
Provisions
$m
Movements
At 1 July 2020
(Charged)/credited to
the income statement
(Charged)/credited
directly to other
comprehensive income
At 30 June 2021
At 1 July 2021
(Charged)/credited to
the income statement
(Charged)/credited
directly to other
comprehensive income
At 30 June 2022
30.7
(19.0)
–
11.7
11.7
22.5
(0.1)
34.1
6.1
(0.1)
–
6.0
6.0
0.8
–
6.8
23.8
(6.6)
–
17.2
17.2
(1.7)
–
15.5
–
–
–
–
–
6.5
–
6.5
5.2
(0.7)
–
4.5
4.5
5.7
0.2
–
5.9
5.9
4.0
(4.0)
–
–
–
(2.0)
(1.0)
11.9
–
2.5
–
4.9
–
11.9
(0.1)
8.1
2022
$m
34.1
6.8
15.5
6.5
2.5
4.9
11.9
82.2
1.5
0.5
0.8
4.8
–
0.5
8.1
90.3
(62.5)
27.8
48.6
41.7
90.3
Other
$m
3.4
1.0
–
4.4
4.4
3.8
2021
$m
11.7
6.0
17.2
–
4.5
5.9
–
45.3
0.1
0.6
0.4
2.6
0.1
0.6
4.4
49.7
(49.7)
–
23.4
26.3
49.7
Total
$m
78.9
(29.2)
–
49.7
49.7
40.8
(0.2)
90.3
Annual Report 2022 71
Notes to the Consolidated Financial Statements
8. Taxation continued
c) Deferred tax liabilities
The balance comprises temporary differences attributable to:
Brands and trademarks and customer contracts and relationships
Deferred acquisition costs
Policy liabilities
Right-of-use assets
Unrealised foreign exchange gains
Unrealised gains on investments
Other
Unearned premium liability
Notes
2022
$m
12.8
36.4
2.3
10.6
0.4
–
62.5
–
–
2021
$m
15.2
37.2
–
11.5
0.6
5.6
70.1
0.1
0.1
Total deferred tax liabilities
62.5
70.2
Set-off of deferred tax liabilities pursuant to set-off provisions
8(b)
Net deferred tax liabilities
Recovery of total deferred tax liabilities:
Deferred tax liabilities to be settled within 12 months
Deferred tax liabilities to be settled after more than 12 months
Brands and
trademarks
and customer
contracts and
relationships
$m
Deferred
acquisition
costs
$m
Policy
liabilities
$m
Right-of-use
assets
$m
Unrealised
foreign
exchange
losses
$m
Unrealised
gains on
investments
$m
(62.5)
–
13.8
48.7
62.5
Other
$m
0.1
–
–
0.1
0.1
(49.7)
20.5
14.7
55.5
70.2
Total
$m
71.2
(1.0)
–
70.2
70.2
–
5.6
–
5.6
5.6
–
–
–
–
–
–
0.1
2.2
2.3
17.9
(6.4)
–
11.5
11.5
(0.9)
–
–
10.6
0.8
(0.2)
–
0.6
0.6
0.2
(0.4)
–
0.4
(5.6)
(0.1)
(9.2)
–
–
–
–
–
–
(0.7)
2.2
62.5
Movements
At 1 July 2020
(Charged)/credited to the income
statement
(Charged)/credited directly to other
comprehensive income
At 30 June 2021
17.7
(2.5)
–
15.2
34.7
2.5
–
37.2
At 1 July 2021
15.2
37.2
(Charged)/credited to the income
statement
(Charged)/credited directly to other
comprehensive income
Acquisition of business
At 30 June 2022
(2.3)
(0.5)
(0.1)
–
12.8
(0.3)
–
36.4
72 Annual Report 2022
for the year ended 30 June 2022 d) Accounting policy
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable
income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences
and to unused tax losses. Deferred income tax is provided in full, using the liability method, on temporary differences arising between
the tax bases of assets and liabilities and their carrying amount in the consolidated financial statements. However, the deferred
income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined
using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the
related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of
investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it
is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and
when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the
entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
nib holdings limited and its wholly-owned Australian controlled entities are a tax consolidated group. As a consequence, the entities
within each group are taxed as a single entity and the deferred tax assets and liabilities of these entities are set-off in the consolidated
financial statements. Details of tax consolidated group are detailed in Note 37 a) ii).
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
Annual Report 2022 73
Notes to the Consolidated Financial Statements
9. Cash and Cash Equivalents
Cash at bank and cash on hand
Short term deposits and deposits at call
2022
$m
183.6
23.3
206.9
2021
$m
148.3
65.6
213.9
a) Accounting policy
Cash and cash equivalents, and bank overdrafts, are carried at face value of the amounts deposited or drawn. For the purpose of the
presentation in the Consolidated Statement of Cash Flows, cash and cash equivalents includes cash on hand, deposits held at call
with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank
overdrafts are shown within borrowings in current liabilities on the balance sheet.
b) Risk exposure
The Group’s exposure to interest rate risk is discussed in Note 3(b). The maximum exposure to credit risk at the reporting date is the
carrying amount of each class of cash and cash equivalents mentioned above.
c) Reconciliation of profit after income tax to net cash inflow from operating activities
Profit for the year
Net (gain)/loss on disposal of property, plant and equipment
Profit on sale of joint venture investment
Fair value (gain)/loss on other financial assets through profit or loss
Share of net (profit)/loss of associates and joint ventures
Non-cash employee (benefits)/expense – share-based payments
Depreciation and amortisation
Depreciation of right-of-use assets and interest on leases
Impairment of right-of-use assets
Impairment of intangibles
Net exchange differences
Change in operating assets and liabilities, net of effect from purchase of controlled entity
Decrease (increase) in receivables
Decrease (increase) in deferred acquisition costs
Decrease (increase) in deferred tax assets
Increase (decrease) in trade payables
Increase (decrease) in unearned premium liability
Increase (decrease) in premium payback liability
Increase (decrease) in policy liabilities
Increase (decrease) in current tax liabilities
Increase (decrease) in deferred tax liabilities
Increase (decrease) in provisions
Net cash flow from operating activities
74 Annual Report 2022
2022
$m
2021
$m
133.8
160.5
1.4
(2.0)
57.7
7.3
1.6
28.3
6.0
–
–
1.4
(5.6)
2.7
(27.8)
27.7
21.7
(7.3)
0.3
31.7
(22.2)
80.9
337.6
0.9
(9.7)
(33.3)
4.8
1.7
26.7
8.9
1.1
8.8
0.1
(11.3)
(8.9)
–
(9.0)
(8.8)
(2.3)
–
(21.2)
28.1
(28.4)
108.7
for the year ended 30 June 2022
d) Net debt
This section sets out an analysis and movements in net debt:
Cash and cash equivalents
Liquid investments
Borrowings – repayable within one year
Borrowings – repayable after one year
Lease liabilities
Net debt
Cash and liquid investments
Gross debt – variable interest rates
Lease liabilities
Net debt
As at 1 July 2020
Cash flows
Acquisition – leases
Foreign exchange adjustments
Other non-cash movements
As at 30 June 2021
Cash flows
Acquisition of business
Acquisition – leases
Foreign exchange adjustments
Other non-cash movements
As at 30 June 2022
2022
$m
206.9
1,010.1
(2.1)
(258.8)
(50.8)
905.3
2021
$m
213.9
858.9
(1.6)
(230.7)
(57.6)
782.9
1,217.0
1,072.8
(260.9)
(50.8)
905.3
(232.3)
(57.6)
782.9
Liabilities
from financing activities
Borrowings
$m
Lease liabilities
$m
Net Debt Total
$m
(232.9)
0.4
–
0.2
–
(232.3)
(30.5)
–
–
1.9
–
(82.6)
10.4
(1.0)
0.2
15.4
(57.6)
9.5
–
(0.4)
0.1
(2.4)
700.6
12.8
(1.0)
0.5
70.0
782.9
167.2
18.2
(0.4)
(2.1)
(60.5)
905.3
Cash and cash
equivalents
$m
Assets
Liquid-
investments
$m
198.0
15.4
–
0.5
–
213.9
(7.5)
1.8
–
(1.3)
–
818.1
(13.4)
–
(0.4)
54.6
858.9
195.7
16.4
–
(2.8)
(58.1)
Sub-total
$m
1,016.1
2.0
–
0.1
54.6
1,072.8
188.2
18.2
–
(4.1)
(58.1)
206.9
1,010.1
1,217.0
(260.9)
(50.8)
Liquid investments comprise current investments that are traded in an active market, being the Group’s financial assets at fair value
through profit or loss.
e) Off-balance sheet arrangements
nib Travel Pty Limited (nib Travel), a wholly-owned subsidiary of nib holdings limited, operates bank accounts held in its name on
behalf of its underwriters in accordance with contractual terms governing the arrangements. These accounts are not considered part
of the cash and cash equivalents of nib Travel. At 30 June 2022 this amounted to $23,217,547 (2021: $30,360,856).
Annual Report 2022 75
Notes to the Consolidated Financial Statements
10. Receivables
Current
Premium receivable
Private Health Insurance Premiums Reduction Scheme receivable
Other receivables
Provision for loss allowance
Prepayments
Expected future reinsurance recoveries undiscounted
on claims paid
on outstanding claims
2022
$m
12.1
46.8
30.8
(2.0)
12.5
0.1
1.2
101.5
As at 30 June 2022, current receivables of the Group with a nominal value of $2.031 million (2021: $2.532 million) were impaired.
The loss allowance as at 30 June 2022 and 2021 was determined as follows for both premium receivables and other receivables:
Group at 30 June 2022
Expected loss rate
Gross carrying amount – premium receivables
Gross carrying amount – other receivables
Loss allowance
Group at 30 June 2021
Expected loss rate
Gross carrying amount – premium receivables
Gross carrying amount – other receivables
Loss allowance
Current
More than 30
days past due
More than 60
days past due
More than 120
days past due
3%
11.4
23.8
1.1
14%
14%
11%
0.5
0.2
0.1
0.2
0.5
0.1
–
6.3
0.7
Current
More than 30
days past due
More than 60
days past due
More than 120
days past due
5%
13.7
16.6
1.4
17%
0.4
0.2
0.1
8%
0.2
1.1
0.1
9%
–
9.5
0.9
%
$m
$m
$m
%
$m
$m
$m
2021
$m
14.3
41.7
27.4
(2.5)
9.7
1.1
2.2
93.9
Total
12.1
30.8
2.0
Total
14.3
27.4
2.5
The closing loss allowances for premium receivables and other receivables as at 30 June 2022 and 2021 reconcile to the opening loss
allowances as follows:
1 July 2020
Increase/(decrease) in loss allowance recognised in profit or loss during the year
Receivables written off during the year as uncollectible
At 30 June 2021
Increase/(decrease) in loss allowance recognised in profit or loss during the year
Receivables written off during the year as uncollectible
At 30 June 2022
As of 30 June 2022 and 30 June 2021 no receivables were past due but not impaired.
Premium
receivables
$m
Other
receivables
$m
1.5
(0.2)
–
1.3
–
–
1.3
0.4
0.9
(0.1)
1.2
0.1
(0.6)
0.7
Total
$m
1.9
0.7
(0.1)
2.5
0.1
(0.6)
2.0
76 Annual Report 2022
for the year ended 30 June 2022 a) Accounting policy
i) Premium receivables
Amounts due from policyholders are initially recognised at fair value, being the amounts due.
They are subsequently measured at amortised cost less allowance for expected credit losses.
The Group has applied the simplified approach to measuring expected credit losses, which uses
a lifetime expected loss allowance. To measure the expected credit losses, premium receivables
have been grouped based on shared risk characteristics.
The amount of expected credit losses is recognised in Premium revenue on the Consolidated
Income Statement.
ii) Other receivables
Other receivables are initially recognised at fair value and subsequently measured at amortised
cost using the effective interest method, less any allowance for expected credit losses. Other
receivables are generally due for settlement within 30 days.
iii) Impairment of
financial assets
The Group has applied the simplified approach to measuring expected credit losses, which uses
a lifetime expected loss allowance. To measure the expected credit losses, other receivables have
been grouped based on shared risk characteristics.
The amount of expected credit losses is recognised in the Consolidated Income Statement.
When a receivable becomes uncollectible it is written off against the expected credit loss account.
Subsequent recoveries of amounts previously written off are credited against other expenses in the
Consolidated Income Statement.
The Group recognises a loss allowance for expected credit losses on financial assets which
are either measured at amortised cost or fair value through other comprehensive income. The
measurement of the loss allowance depends upon the Group’s assessment at the end of each
reporting period as to whether the financial instrument’s credit risk has increased significantly
since initial recognition, based on reasonable and supportable information that is available, without
undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition,
a 12-month expected credit loss allowance is estimated. This represents a portion of the asset’s
lifetime expected credit losses that is attributable to a default event that is possible within the next
12 months. Where a financial asset has become credit impaired or where it is determined that
credit risk has increased significantly, the loss allowance is based on the asset’s lifetime expected
credit losses. The amount of expected credit loss recognised is measured on the basis of the
probability weighted present value of anticipated cash shortfalls over the life of the instrument
discounted at the original effective interest rate.
For financial assets measured at fair value through other comprehensive income, the loss
allowance is recognised within other comprehensive income. In all other cases, the loss allowance
is recognised in the Consolidated Income Statement.
iv) Interest rate risk
Information about the Group’s exposure to interest rate risk in relation to other receivables is
provided in Note 3.
v) Fair value and
credit risk
Due to the short-term nature of current receivables, their carrying amount is assumed to
approximate their fair value.
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of
receivables mentioned above.
vi) Risk exposure
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of
receivable mentioned above. Refer to Note 3 for more information on the risk management policy
of the Group and the credit quality of the Group’s receivables.
vii) Reinsurance and other
recoveries receivable
Reinsurance and other recoveries receivable on paid claims, reported claims not yet paid, incurred
but not reported (IBNR), and unexpired risk liabilities are recognised as revenue. Recoveries
receivable are assessed in a manner similar to the assessment of outstanding claims.
Recoveries are measured as the present value of the expected future receipts, calculated on the
same basis as the liability for outstanding claims (see Note 18).
Annual Report 2022 77
Notes to the Consolidated Financial Statements
11. Financial Assets
a) Financial assets at amortised cost
Short term deposits
2022
$m
8.2
8.2
2021
$m
7.7
7.7
Interest income on financial assets at amortised cost are recorded in investment income in profit or loss in Note 6.
b) Financial assets at fair value through profit or loss
Current
Equity securities
Interest-bearing securities
Property trusts
2022
$m
2021
$m
206.3
792.3
11.5
1,010.1
213.2
645.7
11.2
870.1
The financial assets at fair value through profit or loss are held in unit trusts.
Changes in fair values of financial assets at fair value through profit or loss are recorded in investment income in profit or loss in
Note 6.
The redemption terms for investments in certain managed trusts can be varied by their responsible entities in response to market
conditions. For those investments which cannot be redeemed entirely within one year from reporting date, the amounts have been
allocated between current and non-current in accordance with the maximum percentage redeemable within one year as per the most
recent advice from the manager at the end of the reporting period.
c) Accounting policy
i) Classification
The Group classifies its financial assets into the following measurement categories:
•
those to be measured at fair value (either through other comprehensive income, or through profit or loss),
and
•
those to be measured at amortised cost.
The classification depends on the Group’s business model for managing the financial assets and the
contractual terms of the relevant cash flows.
The Group has determined that financial assets held by entities in the Group that are health and life insurers
are classified as fair value through profit or loss as they are held to back insurance liabilities. These assets are
managed in accordance with agreed investment mandate agreements on a fair value basis and are reported to
the Board on this basis.
A financial asset is measured at amortised cost only if both of the following conditions are met:
•
•
it is held within a business model which objective is to hold assets in order to collect contractual cash
flows, and
the contractual terms of the financial asset represent contractual cash flows that are solely payments of
principal and interest.
ii) Recognition
and
derecognition
Purchases and sales of financial assets are recognised on trade date, being the date on which the Group
commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash
flows from the financial assets have expired or have been transferred and the Group has transferred
substantially all the risks and rewards of ownership.
78 Annual Report 2022
for the year ended 30 June 2022 iii) Measurement
Financial assets at fair value through profit or loss are recognised initially at fair value. All other financial assets
are recognised initially at fair value plus directly attributable transaction costs.
Subsequent to the initial recognition, for financial assets measured at fair value, gains and losses will either
be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will
depend on the business model in which the investment is held as described below.
Reclassification of debt investments is done when and only when its business model for managing those
assets changes. For investments in equity instruments, the fair value will be recorded in profit or loss,
unless the Group has made an irrevocable election at the time of initial recognition to account for the equity
investment at fair value through other comprehensive income (FVOCI).
Financial assets with embedded derivatives are considered in their entirety when determining whether their
cash flows are solely payment of principal and interest.
iv) Debt
instruments
Subsequent measurement of debt instruments depends on the Group’s business model for managing the
asset and the cash flow characteristics of the asset. There are three measurement categories into which the
company classifies its debt instruments:
Amortised cost
Assets that are held for collection of contractual cash flows where those cash flows represent solely
payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that
is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit
or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in
profit or loss using the effective interest rate method.
Fair value through other comprehensive income (FVOCI)
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the
assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements
in the carrying amount are taken through OCI, except for the recognition of impairment losses or reversal of
impairment losses, interest income and foreign exchange gains and losses which are recognised in profit or
loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is
reclassified from equity to profit or loss. Interest income from these financial assets is included in profit or loss
using the effective interest rate method.
Fair value through profit or loss (FVPL)
Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or
loss. A gain or loss on a debt investment that is subsequently measured at FVPL and is not part of a hedging
relationship is recognised in profit or loss and presented net within investment gains/(losses) in the period in
which it arises. Interest income from these financial assets is included in the profit or loss using the effective
interest rate method.
v) Equity
instruments
The Group subsequently measures all investments in equity instruments at fair value. Where the Group’s
management has elected to present fair value gains and losses on equity investments in other comprehensive
income, there is no subsequent reclassification of fair value gains and losses to profit or loss.
Changes in the fair value of financial assets at fair value through profit or loss are recognised in investment
gains/(losses) in the statement of profit or loss. Impairment losses (and reversal of impairment losses) on
equity investments measured at FVOCI are not reported separately from other changes in fair value.
vi) Impairment
The Group assesses on a forward looking basis the expected credit losses (ECL) associated with its financial
assets carried at amortised cost. The recognition of impairment depends on whether there has been a
significant increase in credit risk.
Debt investments at amortised cost are considered to be low credit risk, and thus the impairment provision is
determined as 12 months ECL.
vii) Risk
Information about the Group’s exposure to price risk and interest rate risk is provided in Note 3.
exposure
Annual Report 2022 79
Notes to the Consolidated Financial Statements
12. Deferred Acquisition Costs
Current
Non-current
Movements in the deferred acquisition costs are as follows:
Balance at beginning of year
Acquisition costs deferred during the period
Amortisation expense
Liability adequacy adjustment1
Exchange differences
1. Refer to Note 19 Unearned premium liability and unexpired risk liability
Deferred acquisition costs by segment are as follows:
Australian Residents Health Insurance
New Zealand Residents Health Insurance
International (Inbound) Health Insurance
2022
$m
47.9
2021
$m
55.0
75.7
71.3
2022
$m
126.3
63.8
(60.7)
(4.7)
(1.1)
2021
$m
117.4
67.9
(58.9)
–
(0.1)
123.6
126.3
2022
$m
89.4
31.5
2.7
2021
$m
89.0
33.5
3.8
123.6
126.3
a) Accounting policy
Direct acquisition costs incurred in obtaining health insurance contracts, including broker commissions, are deferred and recognised
as assets where they can be reliably measured and where it is probable that they will give rise to premium revenue that will be
recognised in the consolidated income statement in subsequent reporting periods. This pattern of amortisation reflects the earning
pattern of the corresponding premium revenue.
b) Critical accounting judgements and estimates
i) Australian Residents Health Insurance
Deferred acquisition costs are amortised on a straight line basis over a period of 5 years (2021: 5 years), in accordance with
the expected pattern of the incidence of risk under the open ended insurance contracts to which they relate, which includes
expectations of customers remaining insured.
The Group pays an upfront commission to retail brokers on signing up new members to the business. These upfront commissions will
give rise to future premium revenue beyond the current period and are able to be measured and directly associated with a particular
insurance contract. The Group does not capitalise the indirect administration costs associated with acquiring new members due to
the difficulty in measurement. The Group considers the duration of a health insurance contract to be an open ended agreement as the
Group stands ready to continue to insure its customers under continuing policies. The Group uses average retention rates to determine
the appropriate customer contract life and related amortisation period for customers who purchase insurance through these broker
channels. The analysis included extrapolating historical lapse rates for broker acquired customers but truncating the data at 10 years in
order to allow for the inherent distortion created by extrapolating historical data. This analysis and management’s expectations of future
lapse supports the amortisation period of 5 years. The Group re-performs this analysis at least every six months for reassessment.
A decrease in the expected contract periods of one year would increase amortisation expense by $14.0 million for 30 June 2022.
An increase in the expected contract periods of one year would decrease amortisation expense by $11.4 million for 30 June 2022.
The recoverability of the related deferred acquisition costs is also considered as part of the liability adequacy test performed.
As described in Note 19, the Group has no deficiency in the unearned premium liability at 30 June 2022.
80 Annual Report 2022
for the year ended 30 June 2022 Alternative view
General insurers amortise deferred acquisition costs usually over one year, as their policies generally have a defined term of one
year. With health insurance, if the contract term is considered to be only the term to which the customer has agreed to, or paid to,
the deferred acquisition cost would be amortised over a period of between one and two months, which is the period paid in advance
by the customer. However, the Group believes that does not reflect the open ended nature of a health insurance contract, the
contract periods to which future premium revenue will arise, nor the expected pattern of the incidence of risk under the insurance
contracts to which the costs relate. For these reasons the Group believes the current adopted treatment is more appropriate.
ii) nib New Zealand
The Group incurs upfront commission costs that will give rise to future premium revenue and are able to be directly associated
with a particular insurance contract. These costs are deferred and amortised over the life of the insurance contract. The Group
does not capitalise the indirect administration costs associated with acquiring new members due to the difficulty in identifying
and associating those indirect costs with acquiring particular insurance contracts.
There are two key assumptions required to recognise the acquisition costs over the life of the insurance contract:
•
•
the period of the insurance contract is assumed to be the average length of insurance for nib nz limited policyholders who
are the subject of an upfront commission; and
the average length of insurance for nib nz limited policyholders who are the subject of an upfront commission is calculated
by extrapolating historical lapse rates for that group of policyholders.
The recoverability of the related deferred acquisition costs is also considered through an assessment of the net present value of the
future estimated cash flows for policies that are subject to commission, and as part of the liability adequacy test performed. The
business experienced lower claiming rates due to the pandemic and some claims catch up is expected in FY23. A deferred claims
liability (DCL) has not been utilised in NZ (given differing circumstances to Australia), and a temporary increase in the outstanding
claims (OSC) risk margin ($4.9 million) is warranted to allow for the greater uncertainty around COVID-19 claims which had previously
been addressed through the DCL. Specifically, the company has less risk appetite for the OSC to be understated given these
pandemic risks. This also impacted the liability adequacy test requiring a partial write-off of deferred acquisition costs of $4.7 million.
13. Property, Plant & Equipment
At 1 July 2020
Cost
Accumulated depreciation and impairment
Net book amount
Year ended 30 June 2021
Opening net book amount
Additions
Disposals
Depreciation charge for the year
Closing net book amount
At 30 June 2021
Cost
Accumulated depreciation and impairment
Net book amount
Year ended 30 June 2022
Opening net book amount
Additions
Disposals
Depreciation charge for the year
Closing net book amount
At 30 June 2022
Cost
Accumulated amortisation and impairment
Net book amount
Plant &
Equipment
$m
Leasehold
Improvements
$m
22.2
(17.6)
4.6
4.6
0.6
(0.2)
(2.2)
2.8
19.9
(17.1)
2.8
2.8
1.7
–
(1.7)
2.8
19.9
(17.1)
2.8
17.5
(10.7)
6.8
6.8
0.5
(0.7)
(1.5)
5.1
13.2
(8.1)
5.1
5.1
0.1
–
(1.1)
4.1
11.7
(7.6)
4.1
Total
$m
39.7
(28.3)
11.4
11.4
1.1
(0.9)
(3.7)
7.9
33.1
(25.2)
7.9
7.9
1.8
–
(2.8)
6.9
31.6
(24.7)
6.9
Annual Report 2022 81
Notes to the Consolidated Financial Statements
13. Property, Plant & Equipment continued
a) Accounting policy
All property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of a replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during
the reporting period in which they are incurred.
Depreciation is calculated using the straight-line method to allocate their cost or revalued amounts, net of their residual values, over
their estimated useful lives, as follows:
• Plant and equipment
• Leasehold improvements
3 to 10 years
3 to 10 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate at each reporting date. An asset’s carrying
amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable
amount (see Note 14(a)(v)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.
When revalued assets are sold, it is Group policy to transfer the amounts included in other reserves in respect of those assets to
retained earnings.
14. Intangible Assets
At 1 July 2020
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 30 June 2021
Opening net book amount
Additions
Disposals
Amortisation charge for the year
Impairment charge
Exchange differences
Closing net book amount
At 30 June 2021
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 30 June 2022
Opening net book amount
Additions
Acquisition of business
Disposals
Amortisation charge for the year
Impairment charge
Exchange differences
Closing net book amount
At 30 June 2022
Cost
Accumulated amortisation and impairment
Net book amount
82 Annual Report 2022
Goodwill
$m
Software
$m
Brands and
Trademarks
$m
Customer
Contracts and
relationships
$m
226.5
–
226.5
226.5
–
–
–
(7.6)
(0.2)
218.7
218.7
–
218.7
218.7
–
19.0
–
–
–
(1.4)
236.3
236.3
–
236.3
129.3
(81.6)
47.7
47.7
22.5
(0.1)
(15.3)
–
–
54.8
153.2
(98.4)
54.8
54.8
24.8
0.3
(1.4)
(17.7)
–
(0.2)
60.6
178.0
(117.4)
60.6
32.6
(14.2)
18.4
18.4
–
–
(1.0)
(1.2)
–
16.2
32.6
(16.4)
16.2
80.7
(38.6)
42.1
42.1
–
–
(6.7)
–
(0.1)
35.3
80.6
(45.3)
35.3
16.2
35.3
–
–
–
(1.0)
–
–
15.2
32.4
(17.2)
15.2
–
–
–
(6.8)
–
(0.3)
28.2
79.4
(51.2)
28.2
Total
$m
469.1
(134.4)
334.7
334.7
22.5
(0.1)
(23.0)
(8.8)
(0.3)
325.0
485.1
(160.1)
325.0
325.0
24.8
19.3
(1.4)
(25.5)
–
(1.9)
340.3
526.1
(185.8)
340.3
for the year ended 30 June 2022 a) Accounting policy
i) Goodwill
ii) Software
iii) Brands and trademarks
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s
share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill
on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised. Instead,
goodwill is tested for impairment annually, and is carried at cost less accumulated impairment
losses.
Costs incurred in developing products or systems and costs incurred in acquiring software that
will contribute to future period financial benefits through revenue generation and/or cost reduction
are capitalised to software. Costs capitalised include external direct costs of materials and service
and direct payroll and payroll related costs of employees’ time spent on the project. Amortisation
is calculated on a straight-line basis over periods generally ranging from two and a half years to
five years.
The Group had adopted the treatment set out in the IFRS Interpretations Committee agenda
decision, to recognise the costs as intangible assets only if the implementation activities create
an intangible asset that the entity controls and the intangible asset meets the recognition criteria.
Costs that do not result in intangible assets are expensed as incurred, unless they are paid to the
suppliers of the Software as a service (SaaS) arrangement to significantly customise the cloud-
based software for the Group, in which case the costs are recorded as a prepayment for services
and amortised over the expected renewable term of the arrangement.
Brands and trademarks acquired as part of a business combination are carried at fair value at
the date of acquisition less accumulated amortisation. Amortisation is calculated on the asset’s
estimated useful life which is five years for IMAN Australian Health Plans Pty Ltd and 10 years for
Grand United Corporate Health Limited.
Brands and trademarks acquired with World Nomads Group in July 2015 have an indefinite useful
life and are carried at fair value at the date of acquisition, less impairment losses.
iv) Customer Contracts and
relationships
Customer contracts and relationships acquired as part of a business combination are recognised
separately from goodwill. The customer contracts are carried at their fair value at the date of
acquisition less accumulated amortisation and impairment losses. Amortisation is calculated based
on the timing of projected cash flows of the contracts over their estimated useful lives, which is
• 10 years for both nib nz limited and Grand United Corporate Health Limited;
v) Impairment
• approximately 2.5 years for World Nomads Group;
• 5 to 10 years for QBE Travel.
Goodwill and intangible assets that have an indefinite useful life and are not subject to amortisation
are tested annually for impairment or more frequently if events or changes in circumstances
indicate that they might be impaired. Other assets are tested for impairment whenever events
or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell
and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash inflows which are largely independent of the cash inflows from other
assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that
suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
Annual Report 2022 83
Notes to the Consolidated Financial Statements
14. Intangible Assets continued
b) Allocation of goodwill and intangible assets to CGUs
Goodwill
At 30 June 2022
At 30 June 2021
Brands and trademarks
At 30 June 2022
At 30 June 2021
Customer Contracts and relationships
At 30 June 2022
At 30 June 2021
Software1
At 30 June 2022
At 30 June 2021
Total
At 30 June 2022
At 30 June 2021
Australian
Residents Health
Insurance
Australia
$m
International
Workers Health
Insurance
Australia
$m
New Zealand
Insurance
New Zealand
$m
nib travel Group
Australia
$m
Unallocated to
CGUs
$m
80.2
80.2
$m
2.5
3.0
$m
12.0
14.2
$m
–
–
$m
94.7
97.4
21.1
21.1
$m
–
–
$m
–
–
$m
–
–
$m
21.1
21.1
58.5
40.9
$m
–
–
$m
10.7
14.4
$m
–
–
$m
69.2
55.3
76.5
76.5
$m
12.7
13.2
$m
5.5
6.7
$m
–
–
$m
94.7
96.4
–
–
$m
–
–
$m
–
–
$m
60.6
54.8
$m
60.6
54.8
1. Software is shown as unallocated as it is predominantly a shared services function.
c) Allocation of definite life and indefinite life assets to CGUs
Australian
Residents Health
Insurance
Australia
$m
International
Workers Health
Insurance
Australia
$m
New Zealand
Insurance
New Zealand
$m
nib travel Group
Australia
$m
Unallocated to
CGUs
$m
14.5
17.2
$m
80.2
80.2
$m
94.7
97.4
–
–
$m
21.1
21.1
$m
21.1
21.1
10.7
14.4
$m
58.5
40.9
$m
69.2
55.3
5.5
7.2
$m
89.2
89.2
$m
94.7
96.4
60.6
54.8
$m
–
–
$m
60.6
54.8
Definite life
At 30 June 2022
At 30 June 2021
Indefinite life
At 30 June 2022
At 30 June 2021
Total
At 30 June 2022
At 30 June 2021
84 Annual Report 2022
Total
$m
236.3
218.7
$m
15.2
16.2
$m
28.2
35.3
$m
60.6
54.8
$m
340.3
325.0
Total
$m
91.3
93.6
$m
249.0
231.4
$m
340.3
325.0
for the year ended 30 June 2022 The definite and indefinite life brand names allocated to nib Travel Group CGU (included in Brands and Trademarks table on previous
page) are as follows:
Brands and trademarks
At 30 June 2022
At 30 June 2021
WorldNomads.com
$m
Travel Insurance
Direct
$m
12.7
12.7
–
0.5
Total
$m
12.7
13.2
d) Impairment tests for goodwill and intangibles
Goodwill and intangibles are allocated to a cash-generating unit (CGU).
An asset is considered impaired when its balance sheet carrying amount exceeds its estimated recoverable amount, which is defined
as the higher of its fair value less cost of disposal and its value in use.
The recoverable amount of a CGU is determined based on a value-in-use calculation. The value-in-use calculation uses cash flow
projections based on financial budgets and forecast forward projections approved by management covering a four-year period.
The estimates used in calculating value-in-use are highly sensitive, and depend on assumptions specific to the nature of the Group’s
activities. Actual cash flows and values could vary significantly from forecasted future cash flows and related values derived from
discounting techniques.
e) Key assumptions used for value-in-use calculations
The assumptions used for the cash flow projections for the first four years are in line with the current forecast forward projections.
Key assumptions include policyholder growth, claims ratio and the discount factor.
Policyholder growth is calculated by forecasting the number of sales each month based on budgeted advertising and promotions
spend, less the number of expected lapses each month. Claims ratios are targeted that generate price increases that maintain
price competitiveness, cover expected increases in claims costs, do not adversely affect the funds capital adequacy position and
enable funding of future business growth.
Cash flows beyond the four-year period are extrapolated into perpetuity assuming a growth factor of 2.5%. The Group has
applied a post-tax discount rate to discount the forecast future attributable post tax cash flows.
These assumptions have been used for analysis of each CGU. Management determined policyholder growth and claims ratios
based on past performance and its expectations for the future.
nib Travel Group
The assumptions for nib Travel Group have been reviewed for the ongoing impact of COVID-19 on the travel industry, to which nib
is exposed via the nib Travel Group CGU.
FY23 to FY26 cashflows are based on nib internal budget assumptions and scenarios on the return to post-Covid ’normal’. These
considered factors such as traveller numbers, insurance take-up and market share, as well as market pricing, and have been
set with reference to current market trends as well as external industry forecasts. International tourism has continued to recover
during first half 2022 (calendar period) across major regions. In Australia, nib Travel’s Gross Written Premium has recovered to
beyond pre-Covid inflated levels, assisted by higher pricing for updated products which includes some Covid risk. It is assumed
this recovery will continue across all markets and regions during 2022 and first half 2023 calendar periods, and considering the
current economic and risk climate, prices are not likely to return to previous levels. However, recovery rates are likely to become
more gradual, as tailwinds from pent up travel demand recede.
Terminal growth rates of 2.5% compound annual growth rate have been applied for growth beyond FY26.
f) Significant estimate: Impact of possible changes in key assumptions
Based on the assumptions below, there were no reasonably possible changes in any of the key assumptions that would have
resulted in an impairment write-down of intangibles in any CGU.
For nib travel, a further deterioration in these assumptions may result in an impairment of goodwill. FY23 to FY26 cashflows
would need to diminish by approximately 25% for an impairment to be present. The following table sets out the key assumptions
for those CGUs that have significant goodwill allocated to them.
Annual Report 2022 85
Notes to the Consolidated Financial Statements
14. Intangible Assets continued
f) Significant estimate: Impact of possible changes in key assumptions continued
Policyholder growth
Claims ratio
Long-term growth rate
Pre-tax discount rate
Goodwill
Australian Residents Health Insurance
International Workers Health Insurance
New Zealand Residents Health Insurance
New Zealand Life and Living Insurance
2022
%
3.0
4.8
7.9
6.6
2021
%
2.7
2.8
8.9
na
2022
%
82.1
49.3
65.3
37.6
2021
%
83.2
43.7
63.8
na
2022
%
2.5
2.5
2.5
2.5
2021
%
2.5
2.5
2.5
na
2022
%
11.5
11.5
11.3
11.3
nib travel
Brandnames and trademarks
WorldNomads.com
Revenue growth rate
(forecast years)1
Long-term growth rate
Pre-tax
discount rate
2022
%
37.8
2021
%
3.7
2022
%
2.5
2021
%
2.5
2022
%
16.8
Revenue growth rate
(forecast years)1
Royalty rate
Long-term growth rate
Pre-tax
discount rate
2022
%
37.8
2021
%
3.7
2022
%
2.5
2021
%
2.5
2022
%
2.5
2021
%
2.5
2022
%
16.8
2021
%
12.2
12.2
11.2
na
2021
%
14.8
2021
%
14.8
1. FY22 revenue growth is a 37.8% compound annual growth rate (CAGR) from a FY22 base. FY21 revenue growth has been assumed to represent pre-COVID levels of activity which has then been run
rated. Expected FY25 revenue represents a 3.7% pa compound annual growth rate (CAGR) from 1H20.
15. Lease Assets and Liabilities
a) Right-of-use assets
Right-of-use assets – properties
Additions to the right-of-use assets during the 2022 financial year was $0.4 million (2021: $1.0 million).
b) Finance lease receivables
Current
Non-current
Minimum undiscounted lease payments receivable on the sublease are as follows:
Within 1 year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
Later than 5 years
c) Lease liabilities
Current
Non-current
86 Annual Report 2022
2022
$m
23.1
23.1
2022
$m
2.6
10.2
12.8
2022
$m
2.9
2.6
2.7
2.8
2.5
0.2
2021
$m
26.5
26.5
2021
$m
1.7
10.6
12.3
2021
$m
1.9
2.0
2.1
2.2
2.3
2.6
13.7
13.1
2022
$m
7.0
43.8
50.8
2021
$m
6.9
50.7
57.6
for the year ended 30 June 2022 d) Amounts recognised in the consolidated income statement
The consolidated income statement shows the following amounts related to leases.
Finance income
Gain on recognition of finance sublease (included in other income)
Depreciation charge of right-of-use assets – properties
Impairment of right-of-use assets – properties
Finance costs – interest on lease liabilities
Expenses relating to short-term leases (included in other expenses)
The total cash outflow for leases in 2022 was $8.2 million (2021: $9.0 million).
e) Accounting policy
Notes
6
6
7
7
7
7
2022
$m
0.3
0.1
3.4
–
2.6
0.1
2021
$m
0.2
2.5
5.3
1.1
3.6
0.1
As a lessee
The Group leases various offices. Rental contracts are typically made for fixed periods of 3 to 15 years but may have extension options
as described in (i) below. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value
of the following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable
• variable lease payment that are based on an index or a rate
• amounts expected to be payable by the lessee under residual value guarantees
•
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s
incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset
of similar value in a similar economic environment with similar terms and conditions.
To determine the incremental borrowing rate, the Group:
• where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect
changes in financing conditions since third party financing was received
• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group, which
does not have recent third party financing, and
• makes adjustments specific to the lease, e.g. term, country, currency and security
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in
the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability
is reassessed and adjusted against the right-of-use asset.
Right-of-use assets are measured at cost comprising the following:
•
the amount of the initial measurement of lease liability
• any lease payments made at or before the commencement date less any lease incentives received
• any initial direct costs, and
•
restoration costs
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in
profit or loss. Short-term leases are leases with a lease term of 12 months or less.
Annual Report 2022 87
Notes to the Consolidated Financial Statements
15. Lease Assets and Liabilities continued
e) Accounting policy continued
As a lessor
The Group is a sub-lessor (intermediate lessor) of the right-of-use assets. The Group classifies the sublease as a finance lease or
an operating lease by assessing if the lease transfers substantially all the risks and rewards with reference to the right-of-use asset
arising from the head lease, rather than by reference to the underlying asset.
For subleases classified as a finance lease, the sub-lessor derecognises the right-of-use asset relating to the head lease that it
transfers to the sublease and recognises the net investment in the sublease; any difference between the right-of-use assets and the
net investment in the finance sublease is recognised in profit or loss. At the commencement date, net investment in the finance lease
is measured at an amount equal to the present value of the lease payments for the underlying right-of-use assets during the lease
term. The Group recognises finance income over the lease term, based on a pattern reflecting a constant period rate of return on the
lessor’s net investment in the lease.
i) Extension and termination options
Extension and termination options are included in a number of leases across the Group. These terms are used to maximise
operational flexibility in terms of managing contracts.
The minimum non-discounted cash flows associated with the extensions that have not been recognised is $21.6 million.
16. Payables
Current
Outwards reinsurance expense liability – premiums payable to reinsurers
Trade creditors
Claims payable
Other payables
RESA payable1
Annual leave payable
Non-current
Other payables
2022
$m
1.2
29.2
62.1
59.8
51.4
12.0
2021
$m
0.3
20.8
55.4
49.1
48.2
10.5
215.7
184.3
1.2
1.2
4.3
4.3
1. Risk Equalisation Special Account (RESA) levy, represents expenses incurred under Risk Equalisation Trust Fund arrangements which are provided for within the legislation to support the principle of
community rating.
Annual leave payable is accrued annual leave. The entire amount is presented as current, since the Group does not have an
unconditional right to defer settlement. However, based on past experience, the Group does not expect all employees to take the full
amount of accrued leave or require payment within the next 12 months. The following amounts reflect leave that is not expected to be
taken within the next 12 months.
Annual leave obligation expected to be settled after 12 months
2022
$m
2.0
2021
$m
1.5
a) Accounting policy
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are
unpaid. These amounts are unsecured and are usually paid within 30 days of recognition.
i) Risk Equalisation Special
Account levy
The Risk Equalisation Special Account Levy is accrued based on an industry survey of eligible paid
claims to be submitted to APRA. If a private health insurer notifies APRA of a material variation in
paid claims which can be quantified, the Group adjusts the risk equalisation expense.
88 Annual Report 2022
for the year ended 30 June 2022 17. Borrowings
Current
Bank overdraft
Non-current
Bank loans
2022
$m
2.1
2.1
258.8
258.8
2021
$m
1.6
1.6
230.7
230.7
The bank overdraft comprises the closing positive balance of the bank account, adjusted for unpresented cheques and outstanding
deposits.
The Group has a line-of-credit facility for corporate credit cards issued to nib employees for a total of $2.4 million. Outstanding amounts
as at 30 June 2022 are included in Current Liabilities – Payables under Trade Creditors.
Movements in the bank loans (secured) are as follows:
Balance at beginning of period
Proceeds from borrowings
Exchange differences
Balance at end of period
2022
$m
230.7
30.0
(1.9)
258.8
2021
$m
230.9
–
(0.2)
230.7
a) Accounting policy
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss
over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised
as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee
is deferred until the draw down occurs. To the extent that there is no evidence that it is probable that some or all of the facility will be
drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired.
The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the
consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or
finance costs.
Borrowings are classified as non-current liabilities if the Group has an unconditional right to defer settlement of the liability for at least
12 months after the reporting period.
b) Bank loans
During the year nib holdings limited refinanced its AUD $80.5 million variable rate loan with NAB to extend its maturity date to
9 December 2024 and put in place a new AUD $50.0 million revolving credit facility with a maturity date of 9 December 2024, of which
AUD $30.0 million was drawn down during the year. It also has an AUD $85.0 million variable rate loan with NAB with a maturity date
of 16 December 2023. All loans are carried at amortised cost.
nib nz holdings limited, a wholly owned subsidiary of nib holdings limited, refinanced its NZD $70.0 million variable rate loan with NAB
during the period to extend the maturity date to 9 December 2024.
The above loans have the following financial covenants that must be met by the Group:
Financial Covenant
Ratio as at 30 June 2022
Group Gearing Ratio1 will not be more than 45%
Group Interest Cover Ratio1 will not be less than 3:1.
26.6%
49:1
1. Excludes lease liabilities and associated interest.
nib holdings limited has provided a guarantee and indemnity to NAB on behalf of nib nz holdings limited in respect of the
NZD $70.0 million term loan facility.
c) Risk exposure
Information on the sensitivity of the Group’s profit and equity to interest rate risk on borrowings is provided in Note 3.
Annual Report 2022 89
Notes to the Consolidated Financial Statements
18. Claims Liabilities
Outstanding Claims Liability
Outstanding claims – central estimate of the expected future payment for claims incurred1
Risk margin
Claims handling costs
Gross outstanding claims liability
Outstanding claims – expected payment to the RESA2 in relation to the central estimate
Risk margin
Net outstanding claims liability
Provision for deferred and suspended claims
Provision for deferred and suspended claims
Total claims liabilities
2022
$m
146.9
18.3
1.9
167.1
21.7
1.4
190.2
2021
$m
140.8
14.8
2.1
157.7
24.1
1.3
183.1
110.2
110.2
34.0
34.0
300.4
217.1
1. Includes $0.3 million of outstanding claims for nib Travel’s underwriting company Nomadic Insurance Benefits Limited which is 100% reinsured.
2. Risk Equalisation Special Account (RESA) levy represents expenses incurred under Risk Equalisation Trust Fund arrangements which are provided for within the legislation to support the principle of
community rating.
a) Outstanding claims liability
Movements in the gross outstanding claims are as follows:
Gross outstanding claims at beginning of period
Risk margin
Administration component
Central estimate at beginning of period
Change in claims incurred for the prior year
Claims paid in respect of the prior year
Claims incurred during the period
Claims paid during the period
Effect of changes in foreign exchange rates
Central estimate at end of period
Risk margin
Administration component
Gross outstanding claims at end of period
2022
$m
157.7
(14.8)
(2.1)
140.8
(0.2)
(138.5)
1,749.1
2021
$m
124.4
(9.8)
(2.0)
112.6
(2.5)
(107.8)
1,804.7
(1,603.8)
(1,666.0)
(0.5)
146.9
18.3
1.9
167.1
(0.2)
140.8
14.8
2.1
157.7
i) Actuarial methods and critical accounting judgements and estimates
Provision is made at the period end for the liability for outstanding claims which is measured as the central estimate of the
expected payments against claims incurred but not settled at the reporting date under private health insurance contracts issued
by the Group. The expected future payments include those in relation to claims reported but not yet paid and claims incurred but
not yet reported. To account for inherent uncertainty in the central estimate a risk margin is added. However, given the uncertainty
in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liability established.
The estimated cost of claims includes allowances for Risk Equalisation Special Account (RESA) consequences and claims handling
expense. The central estimates are calculated gross of any recoveries. A separate estimate and risk margin is made of the amounts
that will be recoverable based upon the gross provision. The Group takes all reasonable steps to ensure that it has appropriate
information regarding its claims exposures.
90 Annual Report 2022
for the year ended 30 June 2022 In calculating the estimated cost of unpaid claims, the Group uses estimation techniques based upon statistical analysis of
historical experience. Allowance is made, however, for changes or uncertainties which may create distortions in the underlying
statistics or which might cause the cost of unsettled claims to increase or reduce when compared with the cost of previously
settled claims, including changes in the Group’s processes which might accelerate or slow down the development and/or recording
of paid or incurred claims, compared with the statistics from previous periods.
The outstanding claims estimate for Australian segments is derived based on three valuation classes, namely hospital and
prostheses services combined, medical services, and general treatment. For the New Zealand segment the outstanding claims
estimate is derived based on two valuation classes, surgical and medical. This analysis is supplemented by more granular analysis
within classes as appropriate.
As most claims for health funds are generally settled within one year, no discounting of claims is applied as the difference between
the undiscounted value of claims payments and the present value of claims payments is not likely to be material. Accordingly,
reasonable changes in assumptions would not have a material impact on the outstanding claims balance.
ii) Actuarial assumptions
The following assumptions have been made in determining the outstanding claims liability for claims incurred 12 months to the
following financial years:
Australian Residents Health Insurance
Assumed proportion paid to date
Expense rate
Discount rate
Risk margin
Risk equalisation rate
Risk margin for risk equalisation
International Students Health Insurance
Assumed proportion paid to date
Expense rate
Discount rate
Risk margin
International Workers Health Insurance
Assumed proportion paid to date
Expense rate
Discount rate
Risk margin
NZ Health Insurance
Assumed proportion paid to date
Expense rate
Risk margin
2022
2021
Hospital
%
89.5%
0.75%
0.0%
6.6%
20.2%
6.6%
78.0%
4.0%
0.0%
28.0%
73.5%
3.0%
0.0%
28.5%
Surgical
%
90.2%
2.7%
38.1%
Medical
%
91.7%
0.75%
0.0%
6.6%
20.2%
6.6%
92.6%
4.0%
0.0%
28.0%
88.0%
3.0%
0.0%
28.5%
Medical
%
91.8%
2.7%
38.1%
General
%
98.6%
0.75%
0.0%
6.6%
0.0%
0.0%
97.5%
4.0%
0.0%
28.0%
93.8%
3.0%
0.0%
28.5%
Hospital
%
90.8%
0.80%
0.0%
6.5%
20.8%
6.5%
69.9%
4.0%
0.0%
29.3%
78.2%
3.5%
0.0%
29.3%
Surgical
%
91.8%
3.2%
5.1%
Medical
%
91.8%
0.80%
0.0%
6.5%
20.8%
6.5%
90.5%
4.0%
0.0%
29.3%
88.3%
3.5%
0.0%
29.3%
Medical
%
92.0%
3.2%
5.1%
General
%
98.5%
0.80%
0.0%
6.5%
0.0%
0.0%
98.1%
4.0%
0.0%
29.3%
93.2%
3.5%
0.0%
29.3%
The risk margin of the underlying liability has been estimated to equate to a probability of adequacy of 95% for nib Health Funds
and 99.5% for nib NZ (June 2021: 95% nib Health Funds, 95% nib NZ). The New Zealand business experienced lower claiming
rates due to the pandemic and some claims catch up is expected in FY23. A deferred claims liability (DCL) has not been utilised in
NZ (given differing circumstances to Australia), and a temporary increase in the outstanding claims (OSC) risk margin ($4.9 million)
is warranted to allow for the greater uncertainty around COVID-19 claims which had previously been addressed through the DCL.
Specifically, the company has less risk appetite for the OSC to be understated given these pandemic risks. This also impacted the
Liability Adequacy Test requiring a partial write-off of deferred acquisition costs of $4.7 million.
Annual Report 2022 91
Notes to the Consolidated Financial Statements
18. Claims Liabilities continued
a) Outstanding claims liability continued
iii) Impact of changes in key variables relating to insurance liability
The Group conducts sensitivity analysis to quantify the exposure to risk of changes in the key underlying variables. The valuations
included in the reported results are calculated using certain assumptions about these variables as disclosed above. The movement in
any key variable will impact the performance and equity of the Group. The table below describes how a change in each assumption
will affect the insurance liabilities.
Key variable
Description
Impact of movement in variable
Chain ladder
development
factors
Expense rate
Discount rate
Risk equalisation
allowance
Risk margin
Chain ladder development factors were selected based
on observations of historical claim payment experience.
Particular attention was given to the development of the
most recent 12 months.
An increase or decrease in the chain ladder factors would
lead to a higher or lower projection of the ultimate liability
and a corresponding increase or decrease in claims expense
respectively.
Claims handling expenses were calculated by reference to
both historical and forecast total claims handling costs as a
percentage of historical and forecast claims payments.
An estimate for the internal costs of handling claims is
included in the outstanding claims liability. An increase or
decrease in the expense rate assumption would have a
corresponding impact on claims expense.
As most claims for health funds are generally settled within
one year, no discounting of claims is applied as the difference
between the undiscounted value of claims payments and the
present value of claims payments is not likely to be material.
N/A
In simplified terms, each organisation is required to contribute
to the risk equalisation pool or is paid from the pool to
equalise their hospital claims exposure to policyholders aged
over 55 years of age and in respect of high cost claims. This is
the allowance made in respect of the claims incurred but not
yet paid.
The process of estimating insurance liabilities is uncertain by
nature due to the difficulty of estimating outcomes of events
that will occur in the future. A risk margin is estimated to
increase reserves to a level that is expected to provide a 95%
probability of sufficiency for the outstanding claims liability
for nib Health Funds and 99.5% for nib NZ (June 2021: 95%
nib Health Funds, 95% nib NZ), based on an analysis of past
payment experience volatility.
An estimate for the risk equalisation cost is included in the
outstanding claims liability. An increase or decrease in the
risk equalisation allowance would have a corresponding
impact on RESA Levy.
An estimate of the amount of uncertainty in the
determination of the central estimate. An increase or
decrease in the risk margin would have a corresponding
impact on claims expense.
The table below describes how a change in each assumption will affect the profit after tax.
2022
2021
Movement in
variable
Profit after tax
$m
Profit after tax
$m
+0.5%
-0.5%
+1.0%
-1.0%
+2.5%
-2.5%
+1.0%
-1.0%
(13.7)
13.7
(1.1)
1.1
(2.0)
2.0
(1.2)
1.2
(13.0)
13.0
(1.1)
1.1
(1.9)
1.9
(1.2)
1.2
Variable
Chain ladder development factors
Expense rate
Risk equalisation allowance
Risk margin
92 Annual Report 2022
for the year ended 30 June 2022 b) Provision for deferred and suspended claims
Critical accounting judgements and estimates
Given the lower claims activity due to COVID-19 related lockdowns, restrictions on elective surgery and allied service providers,
the Group believes it has an obligation to recognise as part of claims liabilities a provision for deferred claims based on a present
constructive obligation resulting from a past event under relevant accounting standards.
In nib’s case, the event (impacts of COVID-19 on the availability of and access to procedures since March 2020) has triggered
the deferral of claims activity and benefits that would have otherwise been provided to members. If cover remains in place, a
responsibility exists to provide for these claims that would have ordinarily been incurred under normal circumstances.
nib members with continuing cover would have had an expectation to use and therefore claim on hospital, surgical and ancillary
services had the pandemic not arisen, notwithstanding the backlog of activity. The provision is therefore management’s estimate of
the cost of claims which might have occurred up until 30 June but did not as a result of ongoing impacts of the Delta and Omicron
strains of COVID-19 impacts and are therefore deferred at that date.
A deferred claims liability (DCL) has not been utilised in NZ (given differing circumstances to Australia), and the remaining
commentary relates to nib Health Funds.
In estimating the provision for nib Health Funds, three key steps were undertaken:
1.
Estimating the reduction in claims and risk equalisation (net of any estimated claims catch-up to date) due to reduced
access to services. Incurred claims estimates produced across the period from March 2020 to 30 June 2022 as part of
the outstanding claims provisioning process were compared to a forecast produced using data prior to March 2020 which
considers changing age, product mix and industry participation rates since this time. The difference between forecast and
actual incurred was calculated by modality (claim type) to estimate the financial impact of COVID-19 across the March 2020
to June 2022 period.
2.
Applying a deferral rate (percentage of the reduction in net claims to date due to COVID-19 that is expected to be
caught up in later periods). Certain factors need to be considered when assessing that not all estimated savings translate to
a claims payment backlog at balance date. For example:
a.
there has continued to be lapses of memberships in the normal course of business;
b. some types of private health benefits are less likely to have been deferred;
c.
catch up of benefits between ancillary and hospital categories differs due to capacity in facilities, lead time to arrange
procedures etc;
d. prior experience in different states.
nib’s deferral rates have been estimated as 33% (June 2021: 20%) of net Australian claims reduction to date.
3.
An analytical review over time periods and a comparison of the calculated DCL to industry is conducted with further
review of deferral rates to ensure the outcome appears reasonable.
Risks and uncertainties have been taken into account in the measurement of the liability and are reflected in the key inputs and
judgements. The key risks associated with estimating the components of the provision is the under/over estimation of the claims
deferral rate and to a lesser extent, the under/over estimation of the claims savings (net of risk equalisation impact).
Movements in the deferred and suspended claims are as follows:
Net Deferred and Suspended Claims at beginning of period
Claims handling costs
Gross Deferred and Suspended Claims at beginning of period
Change in deferred and suspended claims estimate for prior period
Deferred and suspended claims provision made during the period
Deferred and suspended claims paid during the period
Gross Deferred and Suspended Claims at end of period
Claims handling costs
Net Deferred and Suspended Claims at end of period
2022
$m
34.0
(0.2)
33.8
(33.8)
129.5
(20.1)
109.4
0.8
110.2
2021
$m
98.8
(0.8)
98.0
(46.1)
24.6
(42.7)
33.8
0.2
34.0
Annual Report 2022 93
Notes to the Consolidated Financial Statements
18. Claims Liabilities continued
b) Provision for deferred and suspended claims continued
The table below describes how a change in the estimate relating to deferred and suspended claims provision disclosed above will
affect the profit after tax.
Variable
Reduction in claims activity
Claims deferral rate
Catch up of claims to date
19. Unearned Premium Liability and Unexpired Risk Liability
a) Unearned premium liability
Current
Non-current
2022
2021
Movement in
variable
Profit after tax
$m
Profit after tax
$m
+2.0%
-2.0%
+10.0%
-10.0%
+20.0%
-20.0%
(1.5)
1.5
(18.4)
18.4
1.4
(1.4)
(0.5)
0.5
(7.0)
7.0
4.8
(4.8)
2022
$m
2021
$m
246.8
218.1
24.2
31.3
The unearned premium liability reflects premiums paid in advance by customers.
$23.0 million has been recognised for the premium increase deferral within the unearned premium liability at 30 June 2022
(30 June 2021: nil). This amount relates to the ASX announcement made on 30 May 2022 to postpone the 2022 premium increase
from 1 April 2022 to 1 November 2022. This provision has been recognised as a reduction to Health Insurance premium revenue in the
consolidated statement of comprehensive income.
Movements in the unearned premium liability are as follows:
Unearned premium liability as at 1 July
Deferral of premiums on contracts written in the period
Earning of premiums written in previous periods
Unearned premium liability as at 30 June
2022
$m
249.4
239.7
(218.1)
271.0
2021
$m
258.1
214.6
(223.3)
249.4
b) Unexpired risk liability
The New Zealand business experienced lower claiming rates due to the pandemic and some claims catch up is expected in FY23.
A deferred claims liability (DCL) has not been utilised in NZ (given differing circumstances to Australia), and a temporary increase in
the outstanding claims (OSC) risk margin ($4.9 million) is warranted to allow for the greater uncertainty around COVID-19 claims which
had previously been addressed through the DCL. Specifically, the company has less risk appetite for the OSC to be understated given
these pandemic risks. This also impacted the liability adequacy test requiring a partial write-off of deferred acquisition costs of
$4.7 million. No unexpired risk liability needed to be recognised.
94 Annual Report 2022
for the year ended 30 June 2022 c) Critical accounting judgements and estimates
A liability adequacy test is required to be performed for the period over which the insurer is “on risk” in respect of premiums paid
in advance. At each reporting date, the adequacy of the unearned premium liability is assessed by considering current estimates
of all expected future cash flows relating to future claims arising from the rights and obligations created. If the sum of the present
value of the expected future cash flows relating to future claims plus the additional risk margin to reflect the inherent uncertainty
in the central estimate exceeds the unearned premium liability, less related intangible assets and related deferred acquisition
costs, then the unearned premium is deemed to be deficient, with the deficiency being recorded in the income statement and
an unexpired risk liability created. The Group applies a risk margin to achieve 75% probability of adequacy for future claims
for Australia (June 2021: 75%) and 97% for New Zealand (June 2021: 75%) which is lower than the 95% (Australia) and 99.5%
(New Zealand) achieved in the estimate of the outstanding claims liability, refer to Note 18(a)(ii) as the former is in effect an
impairment test used to test the sufficiency of the unearned premium liability whereas the latter is a measurement accounting
policy used in determining the carrying value of the outstanding claims liability. No deficiency was identified for the Australian
Residents Health Insurance and International (Inbound) Health Insurance segments as at 30 June 2022 and 2021, however a
deficiency of $4.7 million (2021: $nil) was identified for the New Zealand Insurance segment resulting in a write down of deferred
acquisition costs of $4.7 million. No unexpired risk liability needed to be recognised.
This test is also extended beyond recognised unearned premium liability to include premiums renewable until the next repricing
review, usually 1 April each year.
20. Premium Payback Liability
Current
Non-current
Movements in the premium payback liability are as follows:
Gross premium payback liability at beginning of period
Value of payments currently being processed
Risk margin
Central estimate at beginning of period
Funding/new accrued
Unwind discount rate
Interest rate movement impact
Premium payback payments
Others
Effect of changes in foreign exchange rates
Central estimate at end of the period
Adjustment to ensure reserve exceeds current payout on early lapse
Value of payments currently being processed
Risk margin
Total premium payback liability as at end of period
2022
$m
3.2
7.2
2022
$m
17.7
(1.2)
(0.5)
16.0
2.1
0.3
(1.3)
(8.1)
0.4
(0.2)
9.2
0.1
0.7
0.4
10.4
2021
$m
8.2
9.5
2021
$m
20.1
(1.1)
(0.6)
18.4
2.7
0.2
(0.5)
(4.4)
(0.3)
(0.1)
16.0
–
1.2
0.5
17.7
Risk exposure
Information about the Group’s exposure to interest rate risk in relation to premium payback liability is provided in Note 3(b).
Annual Report 2022 95
Notes to the Consolidated Financial Statements
20. Premium Payback Liability continued
a) Actuarial methods and critical accounting judgements and estimates
The premium payback liability represents the accrued amount of premium expected to be repaid to certain New Zealand health
insurance policyholders. A number of nib nz limited’s health insurance policies have a benefit whereby policyholders receive a
proportion of premiums paid less claims received over the life of their policy, “premium payback”, if certain conditions are met.
This liability represents a long term health insurance contract liability. The liability was determined based on the discounted value of
accumulated excess of premiums over claims at an individual policy level, adjusted for GST recoveries and expected future lapses.
A risk margin at 95% probability of sufficiency was estimated by assuming there are no future lapses. Most of the premium
payback reserve is held in respect of a group of customers where the historical lapse rate is already very low.
The following assumptions have been made in determining the premium payback liability:
Lapse rate until 3 years from premium payback date
Lapse rate within 3 years of premium payback date
Expense rate
Discount rate for succeeding and following year
Risk margin
2022
2021
2.0% – 10.0%
2.0% – 10.0%
0.0% – 1.0%
0.0% – 1.0%
0.0%
0.0%
3.52% – 3.62% 0.57% – 1.00%
4.5%
2.7%
The risk margin has been estimated to equate to a 95% probability of adequacy (2021: 95%).
b) Sensitivity analysis
The Group conducts sensitivity analysis to quantify the exposure to risk of changes in the key underlying actuarial assumptions.
The movement in any key variable will impact the performance and equity of the Group. The table below provides a description of
the processes used to determine these assumptions, as well as how a change in each assumption will affect the insurance liabilities.
Key variable
Description
Impact of movement in variable
Lapse rate
Discount rate
Rate used in calculating the discounted provision
to allow for expected lapses, based on historical
experience.
An increase or decrease in the lapse assumption would
have an inverse impact on the premium payback
liability and risk margin.
Rate used in calculating the discounted provision
to allow for expected investment income, based on
current yields on New Zealand government debt
(risk free rates).
An increase or decrease in the discount rate
assumption would have an inverse impact on the
premium payback liability.
Risk margin
An estimate of the amount of uncertainty in the
determination of the central estimate.
An increase or decrease in the risk margin would have a
corresponding impact on the premium payback liability.
The table below describes how a change in each assumption will affect the profit after tax.
Variable
Lapse rate
Discount rate
Risk margin
2022
2021
Movement in
variable
Profit after tax
$m
Profit after tax
$m
+1.0%
-1.0%
+1.0%
-1.0%
+1.0%
-1.0%
0.1
(0.1)
0.2
(0.2)
(0.1)
0.1
0.3
(0.3)
0.6
(0.5)
(0.1)
0.1
c) Unexpired risk liability
A liability adequacy test was performed allowing for the expected cash flows of each policy over the entire product life.
The future cash flows include
• Expected future payments for claims including risk margin;
• Expected future payments for policy paybacks and management expenses; and
• Expected future revenue from premiums and investment income.
No deficiency was identified at 30 June 2022 (2021: nil) that resulted in an unexpired risk liability needing to be recognised.
96 Annual Report 2022
for the year ended 30 June 2022 21. Policy Liabilities – Life Insurance
As a result of nib’s acquisition of Kiwi Insurance Limited (a wholly owned subsidiary of Kiwi Group Holdings Limited, now renamed
nib nz insurance limited) during the year, nib now has policy liabilities in FY22. They pertain to the portion of the life business in
New Zealand.
As nib nz insurance limited was acquired effective 29 April 2022 (refer to Note 33), there are no comparatives in the following tables.
Policy liabilities contains the following components:
Future policy benefits
Balance of future expenses
Future cost of reinsurance
Planned margins of revenues over expenses
Balance of future revenues
Policy liability for unprojected products
Net policy liabilities at the end of the period
Deferred tax
Gross policy liabilities (net of reinsurance) at end of period
Movements in the policy liabilities
Policy liabilities on acquisition of business
Change in policy liabilities recognised during the period
Exchange differences
Gross policy liabilities (net of reinsurance) at end of period
2022
$m
66.0
53.0
3.0
11.4
(137.7)
(0.7)
(5.0)
(2.3)
(7.3)
2022
$m
(7.7)
0.3
0.1
(7.3)
2021
$m
–
–
–
–
–
–
–
–
–
2021
$m
–
–
–
–
The balance of future expenses and the balance of future revenues within total policy liabilities specifically relating to the future cost of
reinsurance are included in the below reconciliation.
Balance on acquisition of business
Increase/(decrease) in future cost of reinsurance recognised during the period
Exchange differences
Balance at end of period
Profit after tax for nib New Zealand life insurance business is represented by the following:
Planned margins of revenues over expenses
Profit on unprojected products
Change in economic assumptions
Experience profit on projected business
Investment earnings on assets in excess of policy liabilities
Profit after tax
2022
$m
2.1
1.0
(0.1)
3.0
2022
$m
0.1
(0.2)
0.1
0.1
–
0.1
2021
$m
–
–
–
–
2021
$m
–
–
–
–
–
–
Annual Report 2022 97
Notes to the Consolidated Financial Statements
21. Policy Liabilities – Life Insurance continued
Profit after tax for nib New Zealand life insurance business is represented by the following:
Premium revenue
Outwards reinsurance premiums
Net premium revenue
Claims expense
Reinsurance and other recoveries revenue
Net claims expense
Movement in policy liabilities
Other expenses
Profit before income tax
Income tax expense
Profit for the period
2022
$m
3.6
(1.0)
2.6
(1.5)
0.9
(0.6)
(0.3)
(1.6)
0.1
–
0.1
2021
$m
–
–
–
–
–
–
–
–
–
–
–
a) Critical accounting judgements and estimates
Life insurance liabilities (policy liabilities) in the Consolidated Balance Sheet and the changes in policy liabilities in the
Consolidated Income Statement have been calculated using the Margin on Services (“MoS”) methodology in accordance with
New Zealand Society of Actuaries (“NZSA”) Professional Standard 20 Determination of Life Insurance Policy Liabilities and
AASB 1038 Life Insurance Contracts.
MoS is designed to recognise profits on life insurance policies as services are provided to policyholders and income is received.
Profits are deferred and amortised over the life of the policy, whereas losses are recognised immediately. Policy services used to
determine profit recognition include the cost of expected claims, maintaining policies, and investment management. The profit
margin is determined using a profit carrier, a measurable indicator of either the expected cost of the service provided to the
policyholder or the expected income relating to the service. Policy liabilities are generally determined as the present value of all
future expected payments, expenses, taxes and profit margins reduced by the present value of all future expected premiums
(projection method), except in the case of some investment business and group-rated risk business, where policy liabilities are
determined as the accumulated benefits to policyholders less any deferred acquisition expense (unprojected products).
Estimates and judgements are based on historical experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The key areas where critical accounting estimates and judgements are applied are noted below.
i) MoS profit
MoS profit comprised the following components:
• Planned margins of revenues over expenses
At the time of writing a policy and at each reporting date, best estimate assumptions are used to determine all expected
future payments and premiums. Where actual experience replicates best estimate assumptions, the expected profit margin
will be released to profit over the life of the policy.
• The difference between actual and assumed experiences
Experience profits/(losses) are realised where actual experience differs from best estimate assumptions. Instances giving
rise to experience profits/(losses) include variations in claims, expenses, mortality, discontinuance, and investment returns.
An experience profit will emerge when the expenses of maintaining all in-force business in a year are lower than the best estimate
assumption in respect of those expenses. The credit card repayment insurance is valued using an accumulation technique.
• Changes to underlying assumptions
Assumptions used for measuring policy liabilities are reviewed each year. Where the review leads to a change in
assumptions, the change is deemed to have occurred from the end of the year, except for changes in discount rates which
are recognised in the year that the rates are changed.
The financial effect of all other changes to the assumptions underlying the measurement of policy liabilities made during the
reporting period is recognised in the income statement over the future reporting periods during which services are provided
to policyholders.
98 Annual Report 2022
for the year ended 30 June 2022 • Loss recognition on groups of related products
If based on best estimate assumptions, written business for a group of related products is expected to be unprofitable,
the total expected loss for that related product group is recognised in the income statement immediately. If loss making
business becomes profitable previously recognised losses are reversed.
•
Investment earnings on assets in excess of policy liabilities
Profits are generated from investment assets that are in excess of those required to meet policy liabilities. Investment
earnings are directly influenced by market conditions and as such this component of MoS profit will vary from year to year.
ii) Deferred acquisition costs
Acquisition costs represent all costs incurred at the time of writing a life insurance policy. The most significant component of such
costs is usually commissions. Under MoS methodology, where product profitability can support the recovery of acquisition costs,
these costs are deferred and amortised effectively over the expected life of the policy.
iii) Policy liabilities
Policy liabilities for life insurance contracts are computed using statistical or mathematical methods, which are expected to
give approximately the same results as if an individual liability was calculated for each contract. The computations are made
by a suitably qualified actuary on the basis of recognised actuarial methods, with due regards to relevant actuarial principles.
The methodology takes into account the risks and uncertainties of the particular classes of insurance business written.
The key factors that affect the estimation of these liabilities and related assets are:
• The cost of providing benefits and administering these insurance contracts;
• Mortality and morbidity experience on life insurance products, including enhancements to policyholder benefits; and
• Discontinuance experience, which affects the Group’s ability to recover the cost of acquiring new business over the lives
of the contracts.
In addition, factors such as regulation, competition, interest rates, taxes, securities market conditions and general economic
conditions affect the level of these liabilities.
iv) Assets arising from reinsurance contracts
Assets arising from reinsurance contracts are also computed using the above methods. In addition, the recoverability of these
assets is assessed on a periodic basis to ensure that the balance is reflective of the amounts that will ultimately be received,
taking into consideration factors such as counterparty and credit risk. Impairment is recognised where there is objective evidence
that the amounts due to it may not be received and these amounts can be reliably measured.
b) Actuarial policies and methods
The actuarial report on policy liabilities and solvency reserves for the current reporting period was prepared as at 30 June 2022.
The policy liability calculations are performed by David Chamberlain. The value of policy liabilities has been determined in accordance
with NZSA Standard 20. After making appropriate checks, the actuary was satisfied the data provided was satisfactory for the
purposes of his valuation. There were no qualifications issued in the actuarial report.
The key assumptions used in determining policy liabilities have been set after consideration of future expectations including the
impact of COVID-19 and are as follows:
i) Home loan insurance and Life and living insurance
Discount rate (gross of tax)
Discount rate (net of tax)
Inflation on maintenance expenses
Maintenance expenses (per policy)
Maintenance expenses (% of premium)
Discontinuance (rate % per annum)*
* Additional discontinuances have been assumed after age 60.
2022
3.7%
2.6%
1.5%
$217.6
15.0%
13.0%
2021
–
–
–
–
–
–
Annual Report 2022 99
Notes to the Consolidated Financial Statements
21. Policy Liabilities – Life Insurance continued
b) Actuarial policies and methods continued
i) Home loan insurance and Life and living insurance continued
Discount rate
The discount rate used is the 5-year New Zealand government bond rate.
Profit carriers
The profit carrier is gross premium income.
Investment and maintenance
expenses
Investment expenses have been included in the policy maintenance expense.
Taxation
The New Zealand corporate income rate of taxation in effect at the date of the valuation, 28% is assumed.
Mortality and morbidity
– Home loan insurance
For the year ended 30 June 2022 the mortality assumption is 83% of NZSA table NZ10 for males and females.
An adjustment was made for smoking status. Selection, i.e. lower mortality in the period following underwriting,
is allowed for in the first two years. The assumptions for permanent and temporary disablement were based on
the reinsurance rates charged for these risks by its reinsurers.
Mortality and morbidity
– Life and living insurance
For the year ended 30 June 2022 the mortality assumption is 94% of NZSA table NZ10 for males and females.
An adjustment was made for smoking status. Selection, i.e. lower mortality in the period following underwriting,
is allowed for in the first two years. The assumptions for permanent and temporary disablement were based on
the reinsurance rates charged for these risks by its reinsurers.
ii) Term life insurance, credit card and group life insurance
Term life insurance, credit card and group life insurance are valued on an accumulation basis which takes the accumulation of past
cash flows such as premiums received and benefits paid.
iii) Effect of changes in actuarial assumptions
The table below quantifies the changes in present value of future profit margins at 30 June 2022 due to the change in assumptions.
The change in assumptions has no effect on policy liabilities except for the discount rate assumption change.
Discount rate
CPI change
Modelling changes
Premium rate changes
Expenses
Lapse rates
2022
2021
Change in
future profit
margins
$m
Change in
current period
policy liability
$m
Change in
future profit
margins
$m
Change in
current period
policy liability
$m
(1.0)
0.1
(0.5)
–
(3.8)
8.7
1.0
(0.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
iv) Sensitivity analysis
nib nz insurance limited conducts sensitivity analysis to quantify the impacts of changes in the key variables driving profits.
The valuation included in the reported results is nib nz insurance limited’s best estimates of these variables. The analysis below is
performed to gauge the impact on both profit and equity of reasonable possible movements in these best estimate assumptions for
those variables. Some of the assumptions are correlated but for this analysis the assumptions were assessed on an individual basis to
demonstrate the sensitivity of each variable. Note the response to changes in assumptions is not linear. None of the nib nz insurance
limited’s related product groups is in “loss recognition” or would move into “loss recognition” upon the changes set out in the table.
Variable
Discount rate
Mortality
Morbidity/trauma
Lapses
Maintenance expenses*
2022
Change in future profit margins
2021
Change in future profit margins
Movement in variable
+10 basis points
+10%
+10%
+10%
+10%
$m
(0.1)
(1.8)
(1.0)
(2.0)
(3.2)
%
(0.1%)
(16.2%)
(8.9%)
(17.8%)
(27.5%)
$m
–
–
–
–
–
%
–
–
–
–
–
*
Increasing the maintenance expenses by 10% would place the home loan insurance product into loss recognition, which would have an impact on policy liabilities of $0.2 million.
100 Annual Report 2022
for the year ended 30 June 2022 22. Provisions and Employee Entitlements
Current
Long service leave
Termination benefits
Provisions
Non-current
Long service leave
2022
$m
2021
$m
4.8
0.1
1.8
6.7
3.2
3.2
4.8
2.8
–
7.6
3.2
3.2
Amounts not expected to be settled within the next 12 months
The current provision for long service leave includes all unconditional entitlements where employees have completed the required
period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The entire amount is
presented as current, since the Group does not have an unconditional right to defer settlement. However, based on past experience,
the Group does not expect all employees to take the full amount of the provision or require payment within the next 12 months.
The following amounts reflect leave that is not to be expected to be taken or paid within the next 12 months.
Long service leave obligation expected to be settled after 12 months
Movements in provisions
Movements in each class of provision during the financial year are set out below:
2022
$m
4.5
4.5
Premium
increase
deferral
$m
Make good
provision
$m
–
0.4
–
–
0.4
–
1.4
–
–
1.4
2021
$m
4.4
4.4
Total
$m
–
1.8
–
–
1.8
As at 1 July 2021
Additional provision
Amounts used during the year
Reversal of unused provision
As at 30 June 2022
a) Accounting policy
i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits and annual leave are recognised
in payables in respect of employees’ services up to the reporting date and are measured at the
amounts expected to be paid when the liabilities are settled. The portion not expected to be
settled within 12 months is discounted based on expected settlement dates. Liabilities for non-
accumulating sick leave are recognised when the leave is taken and measured at the rate paid
or payable.
ii) Other long-term
employee benefit
obligations
The liability for long service leave is the amount of the future benefit that employees have earned
in return for their service in the current and prior periods. The liability is calculated using expected
future increases in wage and salary rates and expected settlement dates, and is discounted
using G100 treasury discount rates at the balance sheet date which have the maturity dates
approximating to the terms of nib’s obligations.
Annual Report 2022 101
Notes to the Consolidated Financial Statements
22. Provisions and Employee Entitlements continued
a) Accounting policy continued
iii) Bonus plans
A liability for employee benefits in the form of bonus plans is recognised in other creditors when at
least one of the following conditions is met:
iv) Termination benefits
•
•
there are formal terms in the plan for determining the amount of the benefit, or
the amounts to be paid are determined before the time of completion of the financial report,
or
• past practice gives clear evidence of the amount of the obligation.
Liabilities for bonus plans are expected to be settled within 12 months and are measured at the
amounts expected to be paid when they are settled.
Liabilities for termination benefits, not in connection with the acquisition of an entity or operation,
are recognised when a detailed plan for the terminations has been developed and a valid
expectation has been raised with those employees effected that the terminations will be carried
out without possibility of withdrawal. The liabilities for termination benefits are recognised
as current provisions, as liabilities for termination benefits are expected to be settled within
12 months of reporting date.
v) Provisions
A separate provision has been recognised in relation to premium give backs to the extent that
eligible members leave post balance date and prior to receiving the full value of the give back
through the premium price rise deferral.
The Group is required to restore some leased premises to their original condition at the end of the
respective lease terms. The make good provision has been recognised for the present value of the
estimated cost required for restoration. These costs have been included in the Right of Use Asset.
23. Contributed Equity
a) Share capital
Ordinary shares
Fully paid
Other equity securities
Treasury shares
Total contributed equity
b) Movements in share capital
Date
1 Jul 2020
6 Oct 2020
6 Apr 2021
Details
Opening balance
Shares issued – Dividend reinvestment plan
Shares issued – Dividend reinvestment plan
30 Jun 2021
Balance
1 Jul 2021
5 Oct 2021
4 Apr 2022
Opening balance
Shares issued – Dividend reinvestment plan
Shares issued – Dividend reinvestment plan
30 Jun 2022
Balance
102 Annual Report 2022
2022
$m
2021
$m
141.1
132.1
(2.9)
(4.9)
138.2
127.2
No. of shares
Price $
456,819,526
346,540
576,137
457,742,203
457,742,203
715,992
646,574
459,104,769
4.22
5.52
6.69
6.51
$m
127.4
1.5
3.2
132.1
132.1
4.8
4.2
141.1
for the year ended 30 June 2022 c) Treasury shares
Treasury shares are shares in nib holdings limited that are held by the nib Holdings Ltd Share Ownership Plan Trust (Trust) for the
purpose of issuing shares under the Group’s Executive management Short-Term Incentive and Long-Term Incentive share plans.
See Note 36 for more information.
Date
30 Jun 2020
Details
Balance
Acquisition of shares by the Trust
Employee share forfeiture
Employee share issue – LTIP
Employee share issue – STI
30 Jun 2021
Balance
Acquisition of shares by the Trust
Employee share issue – LTIP
Employee share issue – STI
30 Jun 2022
Balance
d) Accounting policy
i) Ordinary shares
No. of shares
1,071,443
223,679
52,071
(141,334)
(192,022)
1,013,837
138,750
(295,090)
(251,695)
605,802
$m
6.0
1.1
–
(1.0)
(1.2)
4.9
0.9
(1.5)
(1.4)
2.9
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new
shares are shown in equity as a deduction, net of tax, from the proceeds. If the entity reacquires
its own equity instruments, for example as the result of a share buy-back, those instruments are
deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the
profit or loss and the consideration paid including any directly attributable incremental cost (net of
income taxes) is recognised directly in equity.
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of
the company in proportion to the number of and amounts paid on the shares held. On a show of
hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one
vote, and upon a poll each share is entitled to one vote.
ii) Employee share trust
The Group has formed a trust to administer the Group’s Executive management Short-Term
Incentive and Long Term-Incentive share plans. This trust is consolidated, as the substance of the
relationship is that the trust is controlled by the Group.
Shares held by the nib Holdings Ltd Share Ownership Plan Trust are disclosed as treasury shares
and deducted from contributed equity.
24. Retained Profits
Balance at the beginning of the year
Net profit attributable to owners of nib holdings limited
Dividends
Balance at the end of the year
2022
$m
567.7
135.7
(114.3)
589.1
2021
$m
470.5
161.1
(63.9)
567.7
Annual Report 2022 103
Notes to the Consolidated Financial Statements
25. Reserves
Share-based payments
Share-based payments exercised
Foreign currency translation
Movements in reserves
Share-based payments
Balance at the beginning of the year
Performance right expense
Transfer to share-based payments exercised reserve on exercise of performance rights
Balance at the end of the financial year
Share-based payments exercised
Balance at the beginning of the year
Transfer from share-based payments reserve on exercise of performance rights
Issue of shares held by nib Holdings Ltd Share Ownership Plan Trust to employees
Balance at the end of the financial year
Foreign currency translation
Balance at the beginning of the year
Currency translation differences arising during the year – gross
Deferred tax
Balance at the end of the financial year
Nature and purpose of reserves
2022
$m
2.6
(10.3)
0.5
(7.2)
2021
$m
2.6
(10.4)
3.0
(4.8)
Notes
2022
$m
2021
$m
2.6
1.6
(1.6)
2.6
(10.4)
1.6
(1.5)
(10.3)
3.0
(3.0)
0.5
0.5
1.5
1.9
(0.8)
2.6
(10.2)
0.8
(1.0)
(10.4)
3.2
(0.2)
–
3.0
8(a)(iii)
i) Share-based payments
The share-based payments reserve is used to recognise the fair value of performance rights and
bonus share rights issued to employees but not exercised.
ii) Share-based payments
exercised
The share-based payments exercised reserve is used to recognise the difference between fair
value of performance rights and bonus share rights accumulated in the share-based payments
reserve and cost of exercising the rights.
iii) Foreign currency
translation
Exchange rate differences arising on translation of foreign controlled entities are recognised in
other comprehensive income as described in Note 1(c) and accumulated in a separate reserve
within equity. The cumulative amount is reclassified to profit or loss when the net investment is
disposed of.
104 Annual Report 2022
for the year ended 30 June 2022 26. Dividends
a) Ordinary shares
Final dividend for the year ended 30 June 2021 of 14.0 cents (2020 – 4.0 cents) per fully paid share
paid on 5 October 2021
Fully franked based on tax paid at 30%
Interim dividend for the year ended 30 June 2022 of 11.0 cents (2021 – 10.0 cents) per fully paid share
paid on 4 April 2022
Fully franked based on tax paid at 30%
Total dividends provided for or paid
b) Dividends not recognised at year end
In addition to the above dividends, since the end of the year the Directors have recommended the payment of a
final dividend of 11.0 cents (2021 – 14.0 cents) per fully paid ordinary share, fully franked based on tax paid at 30%.
The aggregate amount of the proposed dividend expected to be paid on 4 October 2022 out of retained profits at
30 June 2022, but not recognised as a liability at the end of the year, is:
2022
$m
2021
$m
64.0
18.3
50.3
114.3
45.6
63.9
2022
$m
2021
$m
50.5
64.1
c) Franked dividends
The franked portion of the final dividends recommended after 30 June 2022 will be franked out of existing franking credits or out of
franking credits arising from the payment of income tax in the year ending 30 June 2022.
2022
$m
2021
$m
Franking credits available for subsequent financial years to equity holders of parent entity based on a tax rate of 30%
172.8
121.4
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
• Franking credits that will arise from the payment of the amount of the provision for income tax;
• Franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
• Franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
d) Accounting policy
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity,
on or before the end of the financial year but not distributed at balance date.
Annual Report 2022 105
Notes to the Consolidated Financial Statements
27. Earnings Per Share
Profit from continuing operations attributable to the ordinary equity holders of the company
used in calculating basic/diluted EPS
Weighted average number of ordinary shares
Basic/Diluted EPS
a) Accounting policy
2022
2021
$m
#m
cents
135.7
458.4
29.6
161.1
457.2
35.2
i) Basic earnings
Basic earnings per share is calculated by dividing:
per share
•
the profit attributable to equity holders of the company, excluding any costs of servicing
equity other than ordinary shares;
• by the weighted average number of ordinary shares outstanding during the financial year.
ii) Diluted earnings
per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per
share to take into account:
•
•
the after income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares; and
the weighted average number of additional ordinary shares that would have been
outstanding assuming the conversion of all dilutive potential ordinary shares.
b) Information concerning the classification of shares
i) Performance rights
Performance rights granted to employees under the nib holdings Long-Term Incentive Plan are
considered to be potential ordinary shares and are only included in the determination of diluted
earnings per share to the extent to which they are dilutive. The performance rights have not been
included in the determination of basic earnings per share. Details relating to the performance rights
are set out in the Remuneration Report on page 36.
The total 2,108,179 performance rights granted (2021 – 2,011,152) are not included in the
calculation of diluted earnings per share because they are contingently issuable ordinary shares
and conditions were not satisfied at 30 June 2022. These performance rights could potentially
dilute basic earnings per share in the future.
106 Annual Report 2022
for the year ended 30 June 2022 28. Capital Management
The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue
to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost
of capital.
In order to maintain or adjust the capital structure, the Group has a number of levers, including adjusting the amount of dividends paid
to shareholders, returning capital to shareholders, issuing new shares, selling assets, raising or reducing debt or buying back shares.
nib holdings limited
At 30 June 2022 the Group had available capital of $82.4 million above our internal benchmark (after allowing for the payment of a
fully franked final ordinary dividend of 11.0 cents per share, totalling $50.5 million, in October 2022).
Below is a reconciliation of net assets to available capital as at the reporting end date (after allowing for payment of a final dividend):
Net assets
Less: nib health fund capital required
nib nz capital required
nib nz life insurance capital required
Investment in associates
Capital required looking forward 12 months
nib nz intangibles
iihi intangibles
nib travel intangibles
Charitable foundation
Borrowings
Other assets and liabilities
Final dividend
Available capital (after allowing for payment of final dividend)
2022
$m
734.3
(536.8)
(102.3)
(15.1)
(19.2)
(6.7)
(48.2)
(18.4)
(101.8)
(14.3)
258.8
2.6
(50.5)
82.4
2021
$m
706.2
(514.4)
(100.0)
–
(17.8)
(9.7)
(31.5)
(18.4)
(102.7)
(16.1)
230.7
3.5
(64.1)
65.7
nib health funds limited
nib health funds limited, controlled entities, are required to comply with the Solvency and Capital Adequacy Standards under
Schedule 2 and 3 of the Private Health Insurance (Health Benefits Fund Administration) Rules 2007, the Rules are made for the
purposes of Part 4-4 of the Private Health Insurance Act 2007.
To comply with the
Solvency Standard,
nib health funds
limited:
(i)
must ensure that, at all times, the value of cash must be equal to or greater than a specified cash
management amount, plus any solvency supervisory adjustment (Section 4.2 of the Solvency
Standard);
(ii) must have, and comply with, a board endorsed, liquidity management plan designed to ensure
compliance with the solvency requirements described above, and set minimum liquidity requirements
and management action triggers (Section 4.3 of the Solvency Standard).
To comply with the
Capital Adequacy
Standard, nib health
funds limited:
(i)
must ensure that at all times the value of its assets is not less than the amounts calculated under
Section 4.2 (a) and (b) of the Capital Adequacy Standard (Capital Adequacy Requirement);
(ii) must have, and comply with, a written, board endorsed capital management policy.
Annual Report 2022 107
Notes to the Consolidated Financial Statements
28. Capital Management continued
nib health funds limited continued
nib health funds limited has a capital management plan which establishes a target for capital held in excess of the regulatory
requirement; the aim is to keep a sufficient buffer in line with the Board’s attitude to and tolerance for risk. The internal capital target
ensures nib has a minimum level of capital given certain stressed capital scenarios. This currently approximates to 20.7% of total
projected premiums for the next 12 months.
Any capital in excess of the internal capital target, taking a 12-month forward looking view, will be reduced by way of dividend to nib
holdings limited. nib health funds limited paid a dividend of $25.8 million in August 2021 and $56.8 million in February 2022 to nib
holdings limited.
The surplus assets over benchmark at 30 June 2022 and 2021 were as follows:
2022
$m
2021
$m
Total assets nib health funds limited (excluding unclosed business contributions – unearned)
1,379.4
1,216.5
Capital adequacy requirement
Surplus assets for Capital Adequacy1
Net assets nib health funds limited
Internal capital target
Surplus assets over internal capital target
1. Surplus assets for Capital Adequacy based on most recent APRA return.
845.4
534.0
592.6
537.3
55.3
823.7
392.8
540.2
514.4
25.8
In December 2021, APRA released the detailed proposals in relation to its review of the private health insurance capital framework.
The release includes the draft capital standards, draft reporting standards and Quantitative Impact Study (QIS). Following
consultation, additional draft reporting standards impacted by AASB 17, Life and General Insurance Capital (LAGIC) updates and
revisions to the capital framework for private health insurers was further released by APRA in April 2022. The final standards are
anticipated to be released in September 2022 and will be effective from 1 July 2023. nib has planned for the release of the new capital
standards and will update its capital management plan once the final standards are released in September 2022.
nib nz limited
nib nz limited, a controlled entity, is required to comply with the Solvency Standard for Non-Life Insurance Business (2014) published
by the Reserve Bank of New Zealand (RBNZ). The Solvency Standards determine the Minimum Solvency Capital (MSC) required.
A requirement of nib nz limited’s insurance licence is that it maintains capital above the MSC.
The overriding objective
underpinning nib nz limited’s capital
management approach is to operate
with a level of capital judged to be
commercially prudent and within the
bounds of the Board’s risk appetite
which achieves a balance between:
Maintaining a buffer above the RBNZ MSC for nib nz limited;
Maintaining a level of capital that ensures an appropriate financial strength rating; and
Avoiding holding an excessive level of capital, which would otherwise act to reduce returns
on capital for the Group.
Any capital in excess of the benchmark, taking a 12-month forward looking view, will be reduced by way of dividend to nib nz
holdings limited, unless management decide to retain funds for strategic purposes. nib nz limited paid dividends of NZD $6.3 million
in August 2021 and NZD $2.2 million in February 2022 to nib nz holdings limited.
108 Annual Report 2022
for the year ended 30 June 2022 The surplus assets over benchmark at 30 June 2022 and 2021 are as follows:
Actual Solvency Capital
Minimum Solvency Capital
Solvency Margin
Net assets nib nz limited
Capital Adequacy Coverage Ratio
Internal benchmark
Internal benchmark requirement
Surplus assets over internal benchmark
2022
$m
40.9
14.9
26.0
109.8
2.74
2021
$m
38.7
13.2
25.5
111.4
2.93
2.25xMSC
2.25xMSC
33.4
7.5
29.6
9.1
nib nz insurance limited
nib nz insurance limited, a controlled entity, is required to comply with the Solvency Standard for Life Insurance Business issued
by the Reserve Bank of New Zealand (RBNZ).
Based on actuarial advice, the Directors have determined that $10.1 million is the Minimum Solvency Capital required. For the
purposes of this calculation the Company is treated as having and being one statutory fund.
The Actual Solvency Capital determined under that standard is $22.4 million. Therefore the Solvency Margin is $12.3 million.
Solvency requirements at 30 June 2022 are as follows:
Actual Solvency Capital
Minimum Solvency Capital
Solvency Margin
Solvency Ratio
29. Commitments for Expenditure
a) Capital expenditure commitments
Payable:
– not longer than one year
b) Charitable foundation commitments
Payable:
– not longer than one year
– longer than one year and not longer than five years
2022
$m
22.4
10.1
12.3
222%
2022
$m
3.0
3.0
2022
$m
0.7
0.2
0.9
2021
$m
–
–
–
–
2021
$m
1.9
1.9
2021
$m
–
–
–
Annual Report 2022 109
Notes to the Consolidated Financial Statements
30. Contingent Liabilities
a) Guarantees and financial support
nib holdings limited has provided a guarantee and indemnity to NAB on behalf of nib nz holdings limited in respect of the
NZD $70.0 million term loan facility.
nib holdings limited has in place a commitment to fund advances up to NZD $10.0 million to nib nz holdings limited upon written
request. NZD $2.1 million has been drawn down as at 30 June 2022. Any advances would be on the same terms as contained in
current intercompany loans between nib holdings limited and nib nz holdings limited.
nib holdings limited has given an undertaking to extend financial support to a number of other subsidiaries within the Group, and
Footprints Fundraising Inc. (Footprints) by subordinating repayment of debts owed by the entities to nib holdings limited, in favour of
all other creditors. The amount owed from Footprints at balance date is $24,135. This undertaking has been provided as a result of
each of these subsidiaries experiencing deficiencies of capital and reserves, and is intended to enable the entities to continue their
operations and fulfil all financial obligations now and in the future. The undertaking for Footprints is valid until 31 December 2022.
31. Events Occurring after the Balance Sheet Date
On 8 July 2022, nib holdings limited acquired an additional equity holding in Midnight Health Pty Limited for $12.0 million, resulting
in an increased ownership percentage to 63.14%. From that date, the Group gained control of Midnight Health Pty Limited and will
consolidate the financial statements and recognise a non-controlling interest.
There have been no other matters or circumstances that have arisen since the end of the financial year that has significantly affected,
or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future
financial years.
32. Remuneration of Auditors
2022
$
2021
$
864,759
154,289
993,865
153,988
37,560
6,000
25,296
–
12,563
–
24,786
21,420
1,087,904
1,206,622
513,561
28,431
2,181
336,534
13,258
–
544,173
349,792
1,632,077
1,556,414
a) PricewaterhouseCoopers Australia
Audit and review of financial reports
Other statutory assurance services
Other services
Tax compliance services
International tax consulting and tax advice
Regulatory returns advice and regulatory work review
Regulatory returns agreed upon procedures
Total remuneration of PricewaterhouseCoopers Australia
b) Network firms of PricewaterhouseCoopers
Audit and review of financial reports
Other statutory assurance services
Tax compliance services
Total remuneration of network firms of PricewaterhouseCoopers
Total auditors’ remuneration
110 Annual Report 2022
for the year ended 30 June 2022 33. Business Combination
a) Summary of acquisition
On 29 April 2022, nib nz holdings limited, acquired Kiwi Insurance Limited (a wholly owned subsidiary of Kiwi Group Holdings Limited,
now renamed nib nz insurance limited) for a consideration of $41.9 million.
Aligned with nib’s P2P strategy, the acquisition will allow nib to provide health insurance members and Kiwibank customers with a
more comprehensive suite of products.
Details of the provisional purchase consideration are as follows:
Purchase consideration
Cash
Payables
Total purchase consideration
The provisional fair values of the assets and liabilities recognised as a result of the acquisition are as follows:
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value through profit or loss
Software
Payables
Policy liabilities
Current tax payable
Deferred tax liabilities
Net identifiable assets acquired
Add: Goodwill
Net assets acquired
$m
41.2
0.7
41.9
Fair value
$m
1.8
2.5
16.4
0.3
(3.5)
7.7
(0.1)
(2.2)
22.9
19.0
41.9
The goodwill is attributable to the future profitability of the acquired business. None of the goodwill is deductible for tax purposes.
Identification and assessment of acquired intangible assets is in progress and adjustments are expected as part of the final purchase
price allocation in the next financial period.
i) Acquisition related costs
Total acquisition related costs of $3.3 million are included in other expenses in profit or loss and in operating cash flows in the
statement of cash flows.
ii) Revenue and profit contribution
The acquired business contributed $2.6 million to Group revenue and $0.1 million to net profit after tax for the period 30 April 2022 to
30 June 2022.
Annual Report 2022 111
Notes to the Consolidated Financial Statements
33. Business Combination continued
b) Provisional purchase consideration – cash outflow
Outflow of cash to acquire business, net of cash acquired
Cash consideration
Less: Cash balances acquired
Outflow of cash – investing activities
$m
41.2
(1.8)
39.4
c) Accounting policy
The acquisition method of accounting is used to account for all business combinations, including business combinations
involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired.
The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets transferred, the liabilities
incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent
consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are
expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination, are
with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group
recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the
acquiree’s net identifiable assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair
value of any previous equity interest in the acquiree over the fair value of the Group’s share of the net identifiable assets acquired is
recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the
measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present
value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar
borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently
remeasured to fair value with changes in fair value recognised in profit or loss.
112 Annual Report 2022
for the year ended 30 June 2022
34. Interest in Other Entities
a) Subsidiaries and trusts
The consolidated financial statements incorporate the assets, liabilities and results of the following controlled entities in accordance
with the accounting policy described in Note 1(b):
nib holdings limited
nib health funds limited
nib servicing facilities pty limited
nib Life pty limited
nib Global Pty Limited
IMAN Australian Health Plans Pty Limited
nib nz holdings limited
nib nz limited
nib nz insurance limited
nib Options Pty Limited
Realself Pty Limited
Realsurgeons Pty Limited
nib Options Holdings (Thailand) Co Limited
nib Options (Thailand) Co Limited
Digital Health Ventures Pty Limited
nib Philippines Pty Limited
nib Asia Pty Limited
Nuo Ban Business Information Consulting (Shanghai) Co. Ltd
Beijing Jitai Insurance Broker Co. Ltd
nib International Student Services Pty Ltd
nib Travel Pty Limited (formerly World Nomads Group Pty Limited)
WNG Services Pty Limited
nib International Assistance Pty Limited
Suresave Pty Limited
SureSave Net Limited (deregistered on 16 December 2021)
Sure-Save.net Pty Ltd
Travel Insurance Direct Holdings Pty Limited
Travel Insurance Direct Pty Ltd
Travel Insurance Direct (New Zealand) Ltd
Cheap Travel Insurance Pty Limited (deregistered on 2 September 2021)
nib Travel Insurance Distribution Pty Limited
Surecan Technology Pty Ltd
The World Nomads Group Holdings Pty Ltd
World Nomads Pty Ltd
World Nomads Inc
World Nomads Limited
World Nomads (Canada) Ltd
WorldNomads.com Pty Ltd
nib Travel Services (Australia) Pty Limited
Get Insurance Group Pty Limited
World Experiences International Holdings Pty Ltd
World Experiences Seguros De Viagrem Brasil LTDA
nib Travel Services Limited
Nomadic Insurance Benefits Holdings Limited
nib Travel Services Europe Limited
nib Travel Services Europe
World Nomads Travel Lifestyle (Europe) Ltd
nib Travel Services Ireland Limited
Travellr Pty Limited (deregistered on 2 September 2021)
Travel Insurance Compared Pty Limited (deregistered on 2 September 2021)
TravelClear Pty Limited (deregistered on 2 September 2021)
Hello Travel Insurance Pty Limited (deregistered on 2 September 2021)
World Experiences Pty Limited (deregistered on 2 September 2021)
World Experiences Group Pty Limited (deregistered on 2 September 2021)
World Experiences Travel Pty Limited (deregistered on 2 September 2021)
Place of Incorporation
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
New Zealand
Australia
Australia
Australia
Thailand
Thailand
Australia
Australia
Australia
China
China
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
United States of America
United Kingdom
Canada
Australia
Australia
Australia
Australia
Brazil
Cayman Islands
Ireland
Ireland
United Kingdom
Ireland
Ireland
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Beneficial ownership by
Consolidated entity
2022
%
2021
%
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
0
100
100
100
100
100
50
100
100
100
0
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
0
100
100
100
100
100
100
100
100
100
Annual Report 2022 113
Notes to the Consolidated Financial Statements
34. Interest in Other Entities continued
a) Subsidiaries and trusts continued
nib holdings limited also controls the following trusts:
• nib Holdings Ltd Share Ownership Plan Trust
• nib salary sacrifice plan and matching plan trust
• nib Salary Sacrifice (NZ) and Matching Plan (NZ) Trust
• nib holdings – nib nz Employee Share Purchase Scheme Trust
b) Consolidation of nib foundation trust and nib foundation limited
The constitution of nib foundation limited (as trustee for the nib foundation trust) is to enable receipt of unclaimed dividends of
the parent entity (nib holdings limited) to fund charitable donations to the community. The parent is required to consolidate the nib
foundation trust. The assets of the nib foundation trust are shown as restricted in use and the retained earnings are shown as a
restricted reserve of the Group given they can only be distributed for charitable purposes under the constitution of nib foundation trust
and are not available to owners of nib holdings limited.
c) Interest in associates and joint ventures
Set out below are the associates and joint ventures of the Group as at 30 June 2022. The entities listed below have share capital
consisting solely of ordinary shares, which are held directly by the Group. The country of incorporation or registration is also their
principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held.
Name of entity
Honeysuckle Health Pty Ltd
Midnight Health Pty Ltd
Aohua Insurance Consulting Co Ltd
Kangaroo Technologies Ltd
Total equity accounting investments
Place of
business/
country of
incorporation
Australia
Australia
China
China
% of
ownership interest
2022
50.0%
50.0%
75.1%
24.9%
2021
Nature of
relationship
Measurement
method
50.0% Joint venture
0.0% Joint venture
75.1% Joint venture
24.9% Joint venture
Equity
Equity
Equity
Equity
Carrying amount
$m
2022
2021
6.2
2.5
6.8
3.7
5.6
–
8.2
4.0
19.2
17.8
Honeysuckle Health Pty Ltd is a specialist healthcare data science and services company. It is a strategic investment complementing
the Group’s health insurance business.
Aohua Insurance Consulting Co Ltd and Kangaroo Technologies Ltd currently offers health checks and will offer lump-sum critical
illness products across China. It is a strategic investment which utilises the Group’s knowledge and expertise in health insurance but
will limit the Group’s exposure to underwriting risk through a reduced equity holding.
During the year nib holdings limited entered into a Shareholders Deed to acquire 50% of share capital in Midnight Health Pty Ltd.
The share capital was acquired for $4.0 million over 3 tranches. Midnight Health Pty Ltd is a digital health company that provides
telehealth platforms for online consultations, e-prescriptions and delivery of treatments.
114 Annual Report 2022
for the year ended 30 June 2022 i) Summarised financial information for associates and joint ventures
The tables below provide summarised financial information for those joint ventures and associates that are material to the Group.
The information disclosed reflects the amounts presented in the financial statements of the relevant associates and joint ventures and
not the Group’s share of those amounts. They have been amended to reflect adjustments made by the entity when using the equity
method, including fair value adjustments and modifications for differences in accounting policy.
Summarised balance sheet
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Non-current assets
Current liabilities
Financial liabilities (excluding trade payables)
Other current liabilities
Total current liabilities
Total non-current liabilities
Net assets
Reconciliation to carrying amounts:
Opening net assets
Investment
Profit/(loss) for the period
Other comprehensive income
Dividends paid
Closing net assets
Group’s share in %
Group’s share in $
Goodwill
Carrying amount
Summarised statement of comprehensive income
Revenue
Interest income
Depreciation and amortisation
Interest expense
Income tax expense
Profit/(loss) from continuing operations
Profit/(loss) from discontinued operations
Profit/(loss) for the period
Other comprehensive income/(loss)
Total comprehensive income/(loss)
Dividends received from associates and joint venture entities
Honeysuckle Health Pty Ltd
2022
$m
8.4
2.8
11.2
9.5
4.7
0.5
5.2
3.0
2021
$m
12.9
0.9
13.8
0.7
2.4
0.3
2.7
0.6
12.5
11.2
11.2
9.5
(8.2)
–
–
16.9
–
(5.7)
–
–
12.5
11.2
50.0%
50.0%
6.2
–
6.2
10.1
–
(0.4)
–
–
(8.2)
–
(8.2)
–
(8.2)
–
5.6
–
5.6
5.5
–
(0.3)
–
–
(5.7)
–
(5.7)
–
(5.7)
–
Annual Report 2022 115
Notes to the Consolidated Financial Statements
34. Interest in Other Entities continued
c) Interest in associates and joint ventures continued
ii) Individually immaterial associates
In the opinion of the Directors, Aohua Insurance Consulting Co Ltd, Kangaroo Technologies Ltd, and Midnight Health Pty Ltd are
immaterial associates and joint ventures to the Group as at 30 June 2022.
2022
$m
2021
$m
Aggregate carrying amount of individually immaterial associates and joint ventures
12.9
12.2
Aggregate amounts of the Group’s share of:
Profit/(loss) from continuing operations
Post tax profit/(loss) from discontinued operations
Total comprehensive income/(loss)
35. Related Party Transactions
(1.5)
(1.7)
(3.2)
(2.0)
–
(2.0)
a) Related party transactions with key management personnel
Key management personnel are entitled to insurance policies provided at a discount dependant on length of service; in all other
respects the policies are on normal terms and conditions.
There were no other related party transactions with key management personnel during the year, as there were no transactions where
either party had the presence of control, joint or significant influence to affect the financial and operating policies of the other entity.
b) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
2022
$
2021
$
8,888,812
8,462,275
327,162
326,543
48,055
38,379
–
235,676
3,941,048
3,094,494
13,205,077
12,158,367
Detailed remuneration disclosures are provided in the Remuneration Report on pages 22 to 44.
c) Transactions with other related parties
During the financial year, nib was charged totalling $9.6 million (2021: $5.5 million) for the hospital contracting services Honeysuckle
Health Pty Ltd provided, and nib recharged the staff labour cost of $115,291 (2021: $125,121) to Honeysuckle Health Pty Ltd.
116 Annual Report 2022
for the year ended 30 June 2022 36. Share-Based Payments
a) Long-term incentive plan (LTIP)
Performance rights to acquire shares in nib holdings limited are granted to Executives under the Long Term Incentive Plan (LTIP).
Information relating to the LTIP is included in the Remuneration Report on page 36. The nib Holdings Ltd Share Ownership Plan Trust
administers the Group’s Executive management Short-Term Incentive and Long-Term Incentive Share Plans. This Trust has been
consolidated in accordance with Note 1(b).
Set out below is a summary of performance rights granted under the plan:
Balance at the start of the year
Granted as compensation
Exercised
Other forfeitures
Balance at the end of the year
Vested and exercisable at the end of the year
2022
Number of
rights
2021
Number of
rights
2,011,152
1,790,138
556,176
716,918
(295,090)
(141,334)
(164,059)
(354,570)
2,108,179
2,011,152
–
–
The valuation methodology inputs for performance rights granted during the year ended 30 June 2022 included:
a) Performance rights are granted for no consideration and vest subject to nib holdings limited EPS and TSR hurdles.
b) Exercise price: $nil (2021: $nil)
c) Grant date: 26 November 2021 (2021: 27 November 2020 and 8 April 2021)
d) Expiry date: 1 September 2025 (2021: 1 September 2024)
e) Share price at grant date: $5.9205 (2021: $4.4760)
f)
Expected dividend yield: Dividends are assumed based on the expected dividend payout ratio of 60% to 70% of normalised
net profit after tax (with the potential for special dividends above this range)
b) Employee Share Acquisition (tax exempt) Plan (ESAP)
Eligible Australian employees were offered the opportunity to receive part of their salary in the form of shares. All permanent
employees who were an employee at the date the offer was made were eligible to participate in the scheme. Employees may elect not
to participate in the scheme.
ESAP is administered by the Board. Shares granted to the employees by the Board were acquired on-market via a third party trustee
plan company.
Under the plan, participating employees were allocated an aggregate market value up to $1,000 worth of fully paid ordinary shares in
nib holdings limited. Subsequent offers under ESAP are at the Board’s discretion.
Shares issued under the scheme may not be sold until the earlier of three years after issue or cessation of employment. In all other
respects shares rank equally with other fully-paid ordinary shares on issue.
Number of shares purchased on market under the plan to participating employees
2022
41,096
2021
64,894
The shares were allocated in two tranches. The first tranche of shares were allocated on 30 August 2021 following nib’s FY21
full year results presentation at a volume weighted average price of $6.71. The remaining tranche of shares were allocated on
23 February 2022 following nib’s FY22 half year results presentation at a volume weighted average price of $6.79.
Annual Report 2022 117
Notes to the Consolidated Financial Statements
36. Share-Based Payments continued
c) nib NZ Employee Share Purchase Scheme (ESPS)
The scheme rules were adopted on 7 November 2013. On 9 December 2013 eligible employees were offered the opportunity to
receive part of their salary in the form of shares. Employees may elect not to participate in the scheme.
ESPS is administered by the Board. Shares granted to the employees by the Board were acquired on-market via a third party trustee
plan company.
Under the scheme, participating employees were allocated an aggregate market value up to NZD $1,000 worth of fully paid ordinary
shares in nib holdings limited. Subsequent offers under ESPS are at the Board’s discretion.
Shares issued under the scheme may not be sold until the earlier of three years after issue or cessation of employment. In all other
respects shares rank equally with other fully-paid ordinary shares on issue.
Number of shares purchased on market under the plan to participating employees
2022
3,428
2021
1,685
The shares were allocated in two tranches. The first tranche of shares were allocated on 30 August 2021 following nib’s FY21
full year results presentation at a volume weighted average price of $6.71. The remaining tranche of shares were allocated on
23 February 2022 following nib’s FY22 half year results presentation at a volume weighted average price of $6.79.
d) nib Salary Sacrifice Plan and Matching Plan
Business unit managers were offered the opportunity to receive part of their salary in the form of shares, with an additional amount of
shares contributed by the Company. Employees may elect not to participate in the plan.
The plan is administered by the Board. Shares granted to the employees by the Board were acquired on-market via a third party
trustee plan company.
Under the plan, participating employees were allocated an aggregate market value up to $10,000 worth of fully paid ordinary shares in
nib holdings limited, made up of $5,000 salary sacrifice and $5,000 matching company component. Subsequent offers under the plan
are at the Board’s discretion.
Number of shares purchased on market under the plan to participating employees
2022
39,522
2021
52,814
Shares issued under the plan may not be sold until the earlier of three or seven years after issue, or cessation of employment. In all
other respects shares rank equally with other fully paid ordinary shares on issue.
e) Salary Sacrifice Plan (NZ) and Matching Plan (NZ)
The plan rules were adopted on 28 October 2013. On 9 December 2013 New Zealand business unit managers were offered the
opportunity to receive part of their salary in the form of shares, with an additional amount of shares contributed by the Company.
Employees may elect not to participate in the plan.
The plan is administered by the Board. Shares granted to the employees by the Board were acquired on-market via a third party
trustee plan company.
Under the plan, participating employees were allocated an aggregate market value up to NZD $10,000 worth of fully paid ordinary
shares in nib holdings limited, made up of NZD $5,000 salary sacrifice and NZD $5,000 matching company component. Subsequent
offers under the plan are at the Board’s discretion.
Shares issued under the scheme may not be sold until the earlier of three or seven years after issue, or cessation of employment. In
all other respects shares rank equally with other fully paid ordinary shares on issue.
Number of shares purchased on market under the plan to participating employees
2022
3,467
2021
3,657
118 Annual Report 2022
for the year ended 30 June 2022 f) Short-Term Performance Incentive (STI)
All eligible employees have a STI opportunity. For the MD/CEO the maximum target bonus opportunity is 125% of the base
remuneration package with 50% of the calculated entitlement to be deferred into shares. For the CFO, CE ARHI and CEO NZ the
maximum target bonus opportunity is 100% of the remuneration package with 50% of the calculated entitlement deferred into
shares. For the CIO, COO and GELCRO the maximum target bonus opportunity is 80% of the remuneration package with 50% of the
calculated entitlement deferred into shares. For other executives the maximum entitlement is 40% of the remuneration package with
50% of the calculated entitlement deferred into shares.
The nib Holdings Ltd Share Ownership Plan Trust administers the Group’s Executive management Short-Term Incentive and Long-
Term Incentive Share Plans. This Trust has been consolidated in accordance with Note 1(b).
Shares issued by the Trust to the employees are acquired on-market prior to the issue. Shares held by the Trust and not yet issued to
employees at the end of the reporting period are shown as treasury shares in financial statements; see Note 23(c).
Shares were purchased on market and brokerage fees are borne by nib health funds limited.
g) Expenses arising from share-based payments transactions
Shares purchased on market under ESAP and ESPS
Shares purchased on market under nib salary sacrifice plan and matching plan and salary sacrifice (NZ) rules and
matching plan (NZ)
Performance rights granted under LTIP
Shares purchased on market under STI
2022
$m
0.3
0.3
1.7
0.9
3.2
2021
$m
0.3
0.3
1.7
0.9
3.2
h) Accounting policy
The fair value of performance rights granted under the nib holdings Long-Term Incentive Plan is recognised as an employee benefit
expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of
the performance rights granted, which includes any market performance conditions but excludes the impact of any service and
non-market performance vesting conditions and the impact of any non-vesting conditions. Non-market vesting conditions are
included in assumptions about the number of performance rights that are expected to vest. The total expense is recognised over the
vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the
Group revises its estimate of the number of performance rights that are expected to vest based on the non-market vesting conditions.
It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.
The nib holdings Long-Term Incentive Plan is administered by the nib Holdings Ltd Share Ownership Plan Trust; see Note 23(d)(i).
When the performance rights are exercised, the trust transfers the appropriate amount of shares to the employee.
Under the Employee Share Acquisition (tax exempt) Plan, the nib Salary Sacrifice Plan and Matching Plan and the Short-Term
Performance Incentive, shares are acquired on-market and expensed.
Annual Report 2022 119
Notes to the Consolidated Financial Statements
37. Parent Entity Financial Information
The individual financial statements for the parent entity show the following aggregate amounts:
Balance Sheet
ASSETS
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
NET ASSETS
EQUITY
Share capital
Share-based payments
Retained profits
Total Equity
Profit for the year
Total comprehensive income for the year
Refer to Note 30 for contingent liabilities of parent entity.
2022
$m
2021
$m
90.7
792.0
882.7
37.3
195.5
232.8
649.9
410.2
(7.7)
247.4
649.9
2022
$m
107.5
107.5
89.4
744.0
833.4
20.2
165.5
185.7
647.7
401.1
(7.9)
254.5
647.7
2021
$m
40.0
40.0
a) Accounting policy
The financial information for the parent entity, nib holdings limited, has been prepared on the same basis as the consolidated financial
statements, except as set out below.
i) Investments in
subsidiaries,
associates and
joint venture
entities
ii) Tax
consolidation
legislation
Investments in subsidiaries, associates and joint venture entities are accounted for at cost less any provision
for impairment in the financial statements of nib holdings limited. Dividends received from associates are
recognised in the parent entity’s profit or loss, rather than being deducted from the carrying amount of these
investments.
nib holdings limited and its wholly-owned Australian controlled entities have implemented the tax
consolidated legislation.
The head entity, nib holdings limited, and the controlled entities in the tax consolidated group account for
their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax
consolidated group continues to be a standalone taxpayer in its own right.
In addition to its own current and deferred tax amounts, nib holdings limited also recognises the current
tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits
assumed from controlled entities in the tax consolidated group.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully
compensate nib holdings limited for any current tax payable assumed and are compensated by nib holdings
limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits
that are transferred to nib holdings limited under the tax consolidation legislation. The funding amounts are
determined by reference to the amounts recognised in the wholly-owned entities’ financial statements.
The amounts receivable/payable under the tax funding agreement is due upon receipt of the funding advice
from the head entity, which is issued as soon as practicable after the end of each financial year. The head
entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as
current amounts receivable from or payable to other entities in the Group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding
agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.
120 Annual Report 2022
for the year ended 30 June 2022 Directors’ Declaration
for the year ended 30 June 2022
In the Directors’ opinion:
a)
the financial statements and notes set out on pages 46 to 120 are in accordance with the Corporations Act 2001, including:
i.
ii.
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2022 and of its performance for the
financial year ended on that date; and
b)
there are reasonable grounds to believe that nib holdings limited will be able to pay its debts as and when they become due and
payable.
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
The Directors have been given declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the
Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
On behalf of the Board
David Gordon
Director
Newcastle, NSW
19 August 2022
Anne Loveridge
Director
Annual Report 2022 121
Independent Auditor’s Report
to the Members of nib holdings limited
for the year ended 30 June 2022
Independent auditor’s report
To the members of nib holdings limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of nib holdings limited (the Company) and its controlled entities
(together the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 30 June 2022 and of its financial
performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
•
the Consolidated Balance Sheet as at 30 June 2022
the Consolidated Statement of Comprehensive Income for the year then ended
the Consolidated Statement of Changes in Equity for the year then ended
the Consolidated Statement of Cash Flows for the year then ended
the Consolidated Income Statement for the year then ended
the Notes to the Consolidated Financial Statements, which include significant accounting policies
and other explanatory information
the Directors’ Declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial report
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the
Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
PricewaterhouseCoopers, ABN 52 780 433 757
Level 3, 45 Watt Street, PO Box 798, NEWCASTLE NSW 2300
T: +61 2 4925 1100, F: +61 2 4925 1199
Liability limited by a scheme approved under Professional Standards Legislation.
122 Annual Report 2022
Annual Report 2022 123
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and the industry in which it operates. Materiality • For the purpose of our audit we used overall Group materiality of $9.6 million, which represents approximately 5% of the Group’s profit before tax. • We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole. • We chose Group profit before tax because, in our view, it is the benchmark against which the performance of the Group is most commonly measured. • We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds. Audit Scope • The Group provides health and medical insurance to Australian and New Zealand residents, medical insurance to international inbound workers and students, life insurance to New Zealand customers, health related services through its Payer 2 Partner program, as well as distributing travel insurance products both in Australia and internationally. • Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events. • PwC specialists in information technology, along with PwC valuations and actuarial experts have assisted during the audit. • We decided the nature, timing and extent of work that needed to be performed by us as well as the component auditor operating under our instruction. For the procedures carried out by the component auditor, we decided on the level of involvement required from us to be able to conclude whether sufficient appropriate audit evidence had been obtained. Our involvement included issuing written instructions, holding discussions, review of key workpapers, and review of reporting to us by the component auditor. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context. We communicated the key audit matters to the Audit Committee. Independent Auditor’s Report
Key audit matter
How our audit addressed the key audit matter
Estimation of claims liabilities
(Refer to Note 18) [$300.4 million]
a) Outstanding claims liability [$190.2 million]
We considered this a key audit matter because of
the size of the liability and the complexity and
judgements involved in the estimation process.
The liability is an estimate of expected payments
to customers for incurred but not settled insurance
claims. This includes an estimate for known and
reported claims as well as incurred but not yet
reported claims.
Determining a central estimate and related risk
margin involves significant judgement and
statistical analysis and is based on a number of
factors including historical claims rates and
evidence around any changes in the cost of claims.
The estimation of outstanding claims involved
complex and subjective judgements about future
events, both internal and external to the business,
for which small changes in assumptions can result
in material impacts to the estimate.
b) Provision for deferred and suspended
claims [$110.2 million]
We considered this a key audit matter because of
the size of the balance, the continued unusual
circumstances, as described below, that have given
rise to this provision, and the complexity and
judgements involved in the estimation process.
As described in Note 18, this provision has been
recognised to reflect the obligation that the Group
has to pay claims after 30 June 2022 that would
124 Annual Report 2022
Our audit procedures over the estimation of the outstanding
claims liability included, amongst others:
● Developing an understanding of how the Group identified
the relevant methods, assumptions and sources of data,
and the need for changes in them, that are appropriate for
developing the estimate in the context of the Australian
Accounting Standards.
● Developing an understanding of the relevant control
activities associated with developing the estimate.
● Evaluating the design effectiveness and implementation of
relevant controls over claims payments.
● Together with PwC actuarial experts, evaluating the
Group’s actuarial valuation practices and the estimate
established. These procedures included, amongst others:
o Assessing the appropriateness of data used to develop
the estimate, including testing a sample of claims data
used in the outstanding claims liability valuation by
agreeing to supporting documentation.
o Assessing the appropriateness of the Group’s methods
for developing the estimate by reference to the nature of
the estimate and the business, industry and environment
in which the Group operates and our own industry
knowledge.
o Evaluating the appropriateness of the significant
assumptions used to develop the estimate. This included
assessing the assumptions by comparing them to the
Group’s historical experience, audit of subsequent
payment patterns, and our own industry knowledge.
o Testing the mathematical accuracy of the Group’s
actuarial model.
o Assessing the appropriateness of the actuarial methods
applied in determining the risk margin against industry
practice
o Reconciling the results of the outstanding claims liability
valuation to the consolidated financial statements and
assessing the reasonableness of the disclosures made in
the financial statements, including those related to
estimation uncertainty, against the requirements of
Australian Accounting Standards.
Our audit procedures over the estimation of the provision for
deferred and suspended claims included, amongst others:
● Developing an understanding of how the Group identified
the relevant methods, assumptions and sources of data,
and the need for changes in them, that are appropriate for
developing the estimate in the context of the Australian
Accounting Standards.
for the year ended 30 June 2022
Key audit matter
How our audit addressed the key audit matter
ordinarily have been paid prior to 30 June 2022 if
it were not for the temporary unavailability of
elective surgery and reduced access to ancillary
benefits as a result of the COVID-19 pandemic.
The estimation of the provision required
estimating the gross reduction in claims due to
temporary unavailability of elective surgery and
reduced access to ancillary benefits, netted by the
impact on the risk equalisation adjustment, less
amounts determined to have been caught up
during the financial year ended 30 June 2022 and
quantifying the percentage of these savings that
will be caught up as claims after year end.
● Developing an understanding of the impacts of COVID-19
on claims payment patterns in the previous and current
financial years.
● Evaluating the appropriateness of data used to develop the
estimate, including testing a sample of relevant data inputs
used in the model by agreeing to underlying
documentation.
● Together with PwC actuarial experts, evaluating the
estimation process and the estimate established. This
included assessing and evaluating the appropriateness of
the Group’s significant assumptions and methods used for
determining the proportion of claims that have been
deferred to future periods, including consideration of
reasonable alternatives, by comparing them to the Group’s
historical experience and our own industry knowledge.
● Reconciling the provision for deferred and suspended
claims to the consolidated financial statements and
assessing the reasonableness of the disclosures made in the
financial statements, including those related to estimation
uncertainty, against the requirements of Australian
Accounting Standards.
Impairment testing of goodwill and indefinite
lived intangibles
(Refer to Note 14) [$251.5 million]
The Group’s goodwill relates to the Australian
Residents Health Insurance, International
Workers Health Insurance, nib New Zealand, New
Zealand Living Benefits, and the nib Travel Cash
Generating Units (CGUs) ($236.3m) and
indefinite lived intangible assets relating to brands
($15.2m).
Our audit procedures over the impairment testing of goodwill
and indefinite lived intangibles included, among others:
● Assessing whether the division of the Group into Cash
Generating Units (CGUs) was consistent with our
knowledge of the Group’s operations and internal Group
reporting.
● Together with PwC valuation experts, evaluated the
Impairment testing of goodwill and indefinite
lived intangibles was a key audit matter because of
the judgement involved in the determination and
application of assumptions and cash flow forecasts
within the ‘value in use’ modelling. The
subjectivity of the assessment was greater than
normal due to the ongoing effects of the COVID-19
pandemic increasing
uncertainty in respect of estimating future cash
flows, particularly in relation to the travel
insurance business.
The outcome of the nib travel Group CGU
impairment assessment is particularly sensitive to
the values attributed to a number of key
assumptions. Note 14 details these key
assumptions and the impact they have on this
impairment assessment.
appropriateness of the value in use calculation
methodology. These procedures included, amongst others:
o Considering whether the forecast cash flows, including
probability weighted cash flows as applicable, were
appropriate and based on supportable assumptions.
O Assessing the appropriateness of key assumptions by
comparing actual cash flows to previous forecasts and
comparing assumptions underpinning the cash flows to
corroborative evidence including industry data.
o Assessing the appropriateness of the Group’s
assessment of COVID-19 impacts on the nib Travel CGU
cash flow forecasts by reference to publicly available
information regarding possible ongoing implications of
the pandemic on the travel industry.
o Assessing whether the discount rates adopted by the
Group, including components calculated using
management’s expert, reflected the risks of the CGUs by
comparing the discount rate to external market data.
o Evaluating the appropriateness of the terminal growth
rate assumptions by reference to external market data.
o Assessing the appropriateness of the design and testing
the mathematical accuracy of the value in use model.
● Assessing the appropriateness of the disclosures made in
note 14, including those related to estimation uncertainty,
against the requirements of Australian Accounting
Standards.
Annual Report 2022 125
Independent Auditor’s Report
Key audit matter
How our audit addressed the key audit matter
Our audit procedures over the estimation of the revenue
rebate included, amongst others:
● Evaluating the appropriateness of the Group’s accounting
to recognise the premium revenue rebate as at 30 June
2022 in compliance with Australian Accounting Standards.
● Evaluating the adequacy of the process for determining the
value of the rebate, including testing a sample of relevant
data inputs into the model to supporting documentation
and testing the mathematical accuracy of the calculation.
● Evaluating the appropriateness of the Group’s significant
assumptions and methods used for determining the rebate
by reference to the Group’s estimation of savings made
during the financial year and its commitments made to
eligible members.
● Reconciling the premium rebate to the financial statements
and assessing the appropriateness of the disclosures made
in the financial statements against the requirements of
Australian Accounting Standards..
Premium revenue rebate through premium
increase deferral
(Refer to Note 19) [$23.0 million]
We focused on this balance because of the unique
circumstances that have given rise to this rebate
and the mechanism by which the rebate is
delivered.
As described in Note 19, this rebate has been
recognised to reflect the return of permanent net
COVID-19 savings made during FY22. These
savings have arisen from collecting premiums
from members who have been unable to claim
their expected benefits during the year due to
service suspensions related to COVID-19. Nib has
identified eligible members for which it has made
a commitment to return savings either through a
premium price rise deferral or, if an eligible
member is unable to receive the value of the price
rise deferral, via a cash entitlement.
Eligible members are those who paid premiums
during the year, identified as having been financial
members at 31 March and 30 June 2022.
The return of premiums to these eligible members
expected to be made through the price rise
deferral is recognised as an adjustment to the
unearned premium liability at year end. A
separate $0.4m has been recorded as a provision
(Note 22) to reflect the estimated value of the cash
payments required to those eligible members who
leave prior to receiving the benefit in full through
the price rise deferral.
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report for the year ended 30 June 2022, but does not include the financial report
and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
126 Annual Report 2022
for the year ended 30 June 2022
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing
and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 22 to 44 of the directors’ report for the year
ended 30 June 2022.
In our opinion, the remuneration report of nib holdings limited for the year ended 30 June 2022 complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the remuneration
report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing
Standards.
PricewaterhouseCoopers
SK Fergusson
Partner
Newcastle
19 August 2022
Annual Report 2022 127
Shareholder Information
as at 31 August 2022
The shareholder information set out below was applicable as at 31 August 2022.
a. Distribution of Equity Securities
Analysis of numbers of equity security holders by size of holding:
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
There were 610 holders of less than a marketable parcel of ordinary shares.
b. Equity Security Holders
The 20 largest quoted equity security holders
The names of the 20 largest holders of quoted equity securities are listed below:
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR MARK ANTHONY FITZGIBBON
BNP PARIBAS NOMINEES PTY LTD
FITZY (NSW) PTY LTD
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
POWERWRAP LIMITED
CPU SHARE PLANS PTY LTD
NETWEALTH INVESTMENTS LIMITED
MRS MICHELLE MCPHERSON
MODANE PTY LTD
CPU SHARE PLANS PTY LTD
MR JOHN ARTHUR FOYLE TURNER
Unquoted equity securities
Performance rights issued under the nib holdings Long-term Incentive Plan
128 Annual Report 2022
Number of
holders
57,595
65,023
8,770
803
58
132,249
Ordinary Shares
Percentage of
issued shares
%
16.68
8.64
7.95
3.28
3.26
0.49
0.39
0.36
0.33
0.24
0.21
0.19
0.18
0.16
0.12
0.11
0.10
0.10
0.10
0.09
Number held
76,586,168
39,689,066
36,500,150
15,080,080
14,976,468
2,264,164
1,789,169
1,657,704
1,536,118
1,095,501
981,705
874,621
810,559
714,819
569,345
489,174
467,911
459,744
444,147
430,000
197,416,613
43.00
Number on
issue
2,108,179
Number of
holders
14
c. Substantial Holders
Vanguard Group ceased to be a substantial holder on 5 November 2021. There are no other substantial holders.
d. Voting Rights
The voting rights attaching to each class of equity securities are set out below:
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall
have one vote.
Performance rights
No voting rights.
Annual Report 2022 129
Notes
130 Annual Report 2022
Annual Report 2022 131
Notes
132 Annual Report 2022
Corporate Directory
DIRECTORS
Chairman
David Gordon
Managing Director/Chief Executive Officer
Mark Fitzgibbon
Lee Ausburn
Jacqueline Chow
Peter Harmer
Anne Loveridge
Donal O’Dwyer
COMPANY SECRETARIES
Roslyn Toms
Jordan French
EXECUTIVE MANAGEMENT
Managing Director/Chief Executive Officer
Mark Fitzgibbon
Group Chief People Officer
Martin Adlington
Chief Executive – International Visitors
James Barr
Chief Executive – Australian Residents Health Insurance
Edward Close
Group Chief Financial Officer
Nick Freeman
Chief Executive – nib Travel
Anna Gladman
Chief Executive Officer – nib New Zealand
Rob Hennin
Group Chief Information Officer
Brendan Mills
Group Chief Operations Officer
Matt Paterson
Group Executive – Legal and Chief Risk Officer
Roslyn Toms
NOTICE OF ANNUAL GENERAL MEETING
The AGM of nib holdings limited will be held on 18 November
2022. The meeting will be held as a hybrid meeting where
shareholders may attend in person or via an online platform.
Further details will be provided in the Notice of Meeting.
SHARE REGISTER
Computershare Investor Services Pty Limited
Level 3
60 Carrington Street
Sydney NSW 2000
1300 664 316
STOCK EXCHANGE LISTING
nib holdings limited shares (NHF) are listed on the Australian
Securities Exchange.
PRINCIPAL REGISTERED OFFICE IN AUSTRALIA
22 Honeysuckle Drive
Newcastle NSW 2300
13 14 63
AUDITOR
PricewaterhouseCoopers
PricewaterhouseCoopers Centre
Level 3, 45 Watt Street
Newcastle NSW 2300
LEGAL ADVISERS
Ashurst
Level 11, 5 Martin Place
Sydney NSW 2000
BANKERS
National Australia Bank Limited
1 Old Castle Hill Road
Castle Hill NSW 2154
WEBSITE
nib.com.au
Annual Report 2022 133
CELEBRATING 70 YEARS