AUSTRALIAN UNITY LIMITED — Interim / Quarterly Report 2016

Mar 6, 2016

Australian Unity Limited Investor Update

Financial half-year ended 31 December 2015

Tuesday 8 March 2016; 2.00pm to 3.00pm AEDST

By teleconference:

Toll-free number: 1800 175 864 Australia, Sydney: +61 2 8373 3507 Conference ID: 318 065 64

By WebEx:

https://australianunitygroup.webex.com/australianunitygroup/j.php?MTI D=mbbb21ac3c1981e24f0562d5d96acc42d Meeting Number: 866 023 573 Meeting Password: AustralianUnity

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Presenters

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 Kevin McCoy – Chief Financial Officer

Kevin joined Australian Unity in April 2012 and is responsible for the effective execution of our strategic initiatives, treasury, capital management and organisation-wide performance measures. Kevin took on the role of Chief Financial Officer in April 2014.

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 Darren Mann – Group Treasurer

Darren joined Australian Unity in 2012 and has been involved in integration and value creation roles across the group. In June 2015, Darren was appointed Group Treasurer. Prior to this appointment, Darren was the Head of Group Capital Management and led the implementation of the internal performance reporting structure.

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 Brad Duggan – CFO, Independent & Assisted Living

Brad joined Australian Unity in July 2014. Brad has 15 years experience in senior consulting and finance roles at PwC and Grocon.

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Important notice

• This notice relates to all information provided as a part of this presentation including, without limitation, these slides, associated presentations and any oral presentations by the representatives of Australian Unity Limited ACN 087 648 888 ( AUL ) or its officers, directors, employees, agents, advisers or consultants made in connection with or arising out of this presentation ( Information ).

• This presentation has been prepared by AUL.

• The Information is for discussion purposes only and for no other purpose. The Information is provided to parties on the basis that they are persons to whom an invitation or offer of securities would not require disclosure under section 708 of the Corporations Act 2001 (Cth).

• The Information is not financial product advice and reliance should not be placed on the information or opinions contained in the Information.

• The Information does not take into consideration the investment objectives, financial situation or particular needs of any particular investor.

• AUL makes no representation or warranty, express or implied, as to the fairness, accuracy, completeness, correctness or reliability of the statements, estimates, opinions, conclusions and other information contained in the Information.

• To the maximum extent permitted by law, AUL, its related bodies corporate and each of its respective officers, directors, employees, agents, advisers or consultants accept no responsibility for the Information including, but not limited to, forward looking information or projections and disclaims all liability whatsoever for any loss or damage, however so arising, from any use or reliance on the Information.

• The Information is not and does not form an offer, or part of an offer or invitation, to subscribe for or purchase securities. Investors must make their own independent assessment of AUL and its related entities and undertake such additional enquiries as they deem necessary or appropriate for their own investment purposes. Past performance is no indication or guarantee of future performance.

• You should be aware that any forecast, projection or other forward looking statement in the Information is subject to inherent risks, uncertainties and factors beyond AUL’s control. Those risks and uncertainties include factors and risks specific to the business of AUL and its related entities as well as general economic conditions and may cause actual results, performance or achievements to be materially different from those expressed or implied in those statements.

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Overview of Australian Unity

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TRUSTED MUTUAL
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• Heritage dating back to 1840; more than 175 years as an independent Australian mutual

• Currently ~300,000 members; almost 1 million customers

• Profits reinvested for the wellbeing of members, customers and the general community

• A prudentially supervised company, regulated by the Australian Prudential Regulation Authority

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DIVERSE
PORTFOLIO
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• A diversified group of interdependent businesses

• Broad capability and deep experience in healthcare, aged care, home care, retirement accommodation, asset management, funds management and financial advice

• Approximately half of group adjusted EBITDA[1] generated by businesses other than health insurance

• Strong profit history—HY16 NPAT $14.2 million, an increase of $3.1 million, or 28.2%, since HY11

FINANCIAL SUBSTANCE

• Gearing ratio closely managed—35.8% at 31 December 2015 (AYUHB calculation basis)

• Interest cover steady and stable since FY11. At 31 December 2015 was 4.42 times (Bonds basis on a rolling 12 months)

• AYUHA and AYUHB investment grade credit rating of BBB+ by Australia Ratings

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LONG-TERM
OBJECTIVES
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• Aspiring to service two million customers

• Highly influential national brand

• Financial substance with a balanced approach to risk

• Sought after products and services

1 Group adjusted EBITDA excludes corporate functions and eliminations

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Notes and Bonds on issue

• $120.0 million Australian Unity Notes (AYUHA) listed on ASX issued in April 2011. Currently 574,066 Australian Unity Notes remain on issue

• $250.0 million Australian Unity Bonds (AYUHB) listed on ASX issued in December 2015

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175 years of thinking about the future

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1870 1929 1993 2008 2016
Manchester Unity granted Crown land to establish Unemployed Grand United members formed from merger Australian Unity Australian Unity Australian Unity
disadvantaged members homes for aged and contribution fund launched of Manchester Unity and ANA in Victoria launches Remedy Healthcare acquires NSW Home Care
1948 2012
1840 1871 1962 2002
Manchester Unity Australian Natives ANA General Insurance Members’ Centre opens Manchester Unity Aged Australian Unity Financial Planning launched (now Australian Unity to form Big Sky Big Sky Credit Union joins
IOOF founded in Victoria Association Victoria (ANA) established established Company Waverley, Victoriain suburban Glen Australian Unity Personal Financial Services) Australian Unity acquires Better Building Society, at Home Care
1840 TODAY
1964 1996
1848 1902 1948 ANA and MU Australian Unity 2009
Grand United Grand United Life Grand United Centenary Permanent Funds Lifeplan Australia
Order of Odd Assurance Centre – Homes for the Friendly Society
Fellows founded in Scheme Aged and War Memorial Building Societies Management merges with
NSW introduced Nursing Home is opened established in Limited Australian Unity
Victoria established
1926 1961 1986 2005 2014 and 2015
Manchester Unity ANA dental clinic Grand United Rathdowne Place
Grand United NSW
First Insurance opened in Victoria merges with and Peninsula
merges with
Company of Victoria Elizabeth Street, Manchester Unity Grange Wellbeing
established Melbourne Victoria Australian Unity Precincts open
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Australian Unity at a glance as at 31 December 2015 except where indicated

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Social infrastructure challenge:

Australian Unity’s business portfolio is connected by its focus on wellbeing and on providing services that help solve community needs.

The Group seeks to play a role in addressing the nation’s “social infrastructure challenge” arising from the impacts of an ageing demographic, rise of chronic disease and inadequate retirement savings.

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We have expertise to offer this challenge

• We understand the challenges of direct healthcare, particularly in chronic disease management, hospital and rehabilitation in the home and aged care

• We understand the challenges of health financing, both at an individual and population level

• We are experienced in developing and managing large built assets for the healthcare sector

• We are experienced in developing investment instruments for institutional and individual investors who want to contribute to the sector

• We understand the needs of Australians in building and managing retirement savings

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Overview of results and achievements

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Australian Unity 2016 half year highlights

 Steady year-on-year revenue growth and strong increase in profit after tax

Revenue and other income $m

Net profit after tax $m

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1,400
1,200
1,000
800
600
400
200
0
Dec 2013 Jun 2014 Dec 2014 Jun 2015 Dec 2015
Half Year Full Year Half Year Full Year Half Year
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40
35
30
25
20
15
10
5
0
Dec 2013 Jun 2014 Dec 2014 Jun 2015 Dec 2015
Half Year Full Year Half Year Full Year Half Year
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Australian Unity 2016 half year highlights

 Strong year-on-year increases in operating earnings and members’ funds

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Operating earnings $m Members' funds $m
45 580
40
560
35
540
30
25 520
20
500
15
480
10
5 460
0 440
Dec 2013 Jun 2014 Dec 2014 Jun 2015 Dec 2015 Dec 2013 Jun 2014 Dec 2014 Jun 2015 Dec 2015
Half Year Full Year Half Year Full Year Half Year Half Year Full Year Half Year Full Year Half Year
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Operating earnings: profit before tax attributable to members of Australian Unity less investment income, borrowing costs exclusive of accommodation bond interest reclassification and discontinued operations and business acquisition costs.

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Half year financial results overview

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Up
Up
18.2
7.4%
%
Revenue and other
Profit after tax
income
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• Revenue and other income of $630.4 million, (including $576.1 million attributable to Australian Unity members) and profit after tax of $14.2 million

• Increases in adjusted EBITDA in all revenue segment areas

• Operating earnings $18.7 million, up 43.7 percent

• Solid result flowed largely from operating earnings growth generated by the Group’s business segments

*Attributable to Australian Unity members

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Gearing analysis and interest cover

• The Gearing Ratio on the Bonds calculation basis at 31 December 2015 was 35.8 percent

• The Gearing Ratio on the Notes calculation basis at 31 December 2015 was 43.6 percent

• The interest cover ratio on the Bonds calculation basis at 31 December 2015 was 4.42 times

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50% 250
48%
225
46%
200
44%
175
42%
40% 150
38%
125
36%
100
34%
75
32%
30% 50
June 2012 Dec 2012 June 2013 Dec 2013 June 2014 Dec 2014 June 2015 Dec 2015
Debt Capacity to 45% ($m) (RHS) Debt Capacity to 50% ($m) (RHS)
2011 Notes Gearing Ratio (LHS) 2011 Notes Covenant (LHS)
Bonds Gearing Ratio (LHS) Bonds Covenant (LHS)
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Business segment highlights

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Financial results by segment

Segment results

All businesses contributed solid results with year on year growth in adjusted EBITDA. The group continues to focus on organic growth and pursuing its strategy of serving the wellbeing needs of Australians.

Adjusted EBITDA $m

Total assets by business segments $m

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35
30
25
20
15
10
5
0
Health Independent Investments Personal
Insurance and and Assisted Financial
Allied Health Living Services
31 Dec 2014 31 Dec 2015
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2,500
2,000
1,500
1,000
500
0
31 Dec 2014 31 Dec 2015
Independent and Assisted Living
Personal Financial Services
Investments
Health Insurance and Allied Health
Corp Functions & Eliminations
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Healthcare

The Healthcare segment results incorporate activities from the Group’s retail health insurance fund, the corporate health insurance fund (GU Health), dental clinics, and allied health operations (Remedy Healthcare).

The half-year included the acquisitions of Mobile Physio in July and Lincs Healthcare in December. Both acquisitions support expansion of Remedy’s footprint. Remedy also continues to expand chronic disease management programs, and during the period launched its mental health program, MindStep.

The number of policyholders in both the retail and corporate health insurance funds has remained largely stable.

Notwithstanding this positive half-year result for the Healthcare business, the underlying economics of the Australian healthcare system continue to be under pressure.

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Business segment highlights

Healthcare

Healthcare’s half-year result entrenches the business’ return to better financial performance following the material impacts from the external environment in periods prior to FY15. Despite industry-wide stressors, policyholder numbers in both funds have remained stable.

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29.5
29.0
28.5
28.0
27.5
27.0
26.5
26.0
25.5
25.0
24.5
24.0
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Adjusted EBITDA $m

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Health Insurance and Allied Health

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Up
12.2%
Adjusted
EBITDA
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Revenue $426.4 million

31 Dec 2014 31 Dec 2015

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Independent and Assisted Living

Independent and Assisted Living operations include retirement communities and aged care facilities across NSW and Victoria, as well as a growing home care business in these states.

Growth in the existing home care operations continued to be a key factor underpinning the half-year result, with the business positioned well for further growth in this area associated with the transfer of the Home Care Service of NSW from the NSW Government. The transfer was formally completed on 19 February 2016.

A highlight of the half-year was the continuing high—and above industry average—occupancy levels which continue to be recorded at both retirement villages and aged care facilities.

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Business segment highlights

Independent and Assisted Living

The Independent and Assisted Living (formerly Retirement Living) business backed up its strong 2014 and 2015 results with a very positive half-year. The continued rapid growth of the Home Care business was the highlight of the half-year.

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Adjusted EBITDA $m
12.0
11.5 Up
12.8%
11.0
10.5
Adjusted
10.0
EBITDA
9.5
Independent and Assisted Living
Revenue
31 Dec 2014 31 Dec 2015 $64.0 million
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Investments

The Investments segment results incorporate activities from the Group’s funds management, real estate investment, bonds and banking operations.

Several of the business’ leading funds produced very positive performance relative to the market and earned performance fees. Funds under management at 31 December 2015 was $8.2 billion (30 June 2015: $7.3 billion).

The ADI business, Big Sky Building Society, performed strongly, with continued positive growth in lending. Big Sky finished the half with $827 million in on-balance sheet assets at 31 December 2015 compared to $754 million at 30 June 2015.

During the half-year, Big Sky consistently outperformed peer system growth rates, with loan growth at record levels ($116 million of new loans during the period and net loan book growth of 10 percent).

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Business segment highlights

Investments

The Investments business performed very well in the half-year despite the volatility still omnipresent in investment markets.

Adjusted EBITDA $m

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8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Investments
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31 Dec 2014 31 Dec 2015

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Up
41.2%
Adjusted
EBITDA
Revenue
$53.4 million
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Personal Financial Services

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Personal Financial Services includes activities from the Group’s financial advice, finance broking and estate planning and administrations business areas.

During the half-year the business completed the significant strategic acquisition of estate planning and administration specialists Flinders Australia Limited. This acquisition enables Australian Unity to offer a wider range of services.

The revenue increase was largely as a result of the Flinders Australia acquisition, along with increased productivity from existing advisers and brokers.

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Business segment highlights

Personal Financial Services

Personal Financial Services continued to record strong growth in the first half of the 2016 financial year.

Adjusted EBITDA $m

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1.8
1.6
1.4
1.2 Up
254%
1.0
0.8
0.6 Adjusted
0.4 EBITDA
0.2
0.0 Revenue
Personal Financial Services
$33.5 million
31 Dec 2014 31 Dec 2015
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Creating community value

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