Half year results presentation - Bupa
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Half year results presentation 6 months ended 30 June 2017
Overview Market unit performance Financial review Outlook & operating priorities
2017 half year results presentation
Agenda
1. Overview Section 2 Section 3
2. Market Unit performance
3. Financial review
Market unit
4. Outlook and operating priorities
Financial
performance
5. Questions and Answers review
Evelyn Bourke, Group CEO Joy Linton, CFO Martin Potkins, Corporate Controller
Gareth Evans, Group Treasurer
2
Overview Market unit performance Financial review Outlook & operating priorities
Section 1
Overview
Evelyn Bourke, Group CEO
3
Overview Market unit performance Financial review Outlook & operating priorities
HY 2017 Group highlights
Embedding Bupa’s strategic framework
• Using Net Promoter System to improve customer experience
• Focusing on digital transformation and continuous improvement
• Investing in strength and depth in key markets, and in risk management and compliance
4
Overview Market unit performance Financial review Outlook & operating priorities
HY 2017 Group highlights
Investing in strength and depth for future growth
Operating highlights: Operating environment characterised by:
Growth in revenue, underlying profit and Challenging and volatile political and economic
cashflow in H1 environments
Australian health insurance business remains
No.1 provider in highly competitive market Affordability pressures for customers
In the UK, completed Oasis Dental Care
acquisition; integration on track Intense competition
Bupa Arabia stake increased from 26.25% to
34.25%
Bupa Thailand assets held for sale, with
divestment announced on 25 July 2017.
New CPO; Appointment of CEO International
Markets announced.
5
Overview Market unit performance Financial review Outlook & operating priorities
HY 2017 Group highlights
Revenue +4% CER Net cash flow from operations +8% AER
£6.1bn £554.4m
Underlying profit before tax +11% CER Solvency coverage ratio (1) -44% pts
£330.9m 160%
Statutory profit before tax +66% AER
£231.3m
(1) The Solvency II capital coverage ratio is an estimated value.
6
Overview Market unit performance Financial review Outlook & operating priorities
Section 2
Market Unit
performance
Joy Linton, Chief Financial Officer
7
Overview Market unit performance Financial review Outlook & operating priorities
Australia and New Zealand
Australian health insurance drives growth, albeit in an increasingly
testing market
Revenue +5% CER Operating Environment
£2,439.3m +23% AER • Continuing pressure on customer affordability in a highly
competitive health and care environment
(HY 2016: £2,331.9m CER)
• Ongoing public policy initiatives impacting growth; Bupa in active
Underlying profit +3% CER
discussions with Government
+22% AER
£163.1m Performance
(HY 2016: £159.1m CER)
• Revenue and profit growth for Bupa Health Insurance, despite
slower overall health insurance market growth
Revenue by business
• Australian Aged Care business negatively impacted by altered
Aged Care Funding instrument; occupancy rates at 96.5%
• New Zealand Aged Care business performed well; occupancy at
90.4%
• Growth in Health Services business, driven by dental
• Bupa Medical Visa Services partnership extended by two years
• Digital enhancements improving customer experience
8
Overview Market unit performance Financial review Outlook & operating priorities
United Kingdom
Good performance despite macro challenges
Operating Environment
Revenue -7%
• IPT continues to impact affordability
£1,369.6m • Unpredictable political and economic environment; Brexit
(HY 2016: £1,479.3m) causing uncertainty
Underlying profit +17%
Performance
£84.6m • Revenue is down 7% reflecting the sale of Bupa Home
(HY 2016: £72.1m) Healthcare (BHH), however up 11% when excluding the BHH
sale to Celesio
Revenue by business
• Underlying profit has grown by 17%, mainly due to the
acquisition of Oasis Dental Care and improved fee rates in Care
Services
• Health Insurance revenues remain steady, driven by SME and
corporate segments; Individual segment in decline
• Acquisition of Oasis was completed in February; Integration on
track and new brand to be announced shortly
• Care Services performing well with improved fee rates positively
impacting business
9
Overview Market unit performance Financial review Outlook & operating priorities
Europe and Latin America
Strong performance across all businesses, particularly insurance
Operating Environment
Revenue
+8% CER
• Improved, stabilised political environment in Spain
£1,407.4m +22% AER
• Challenging market conditions in Chile and Poland
(HY 2016: £1,306.1m CER)
Underlying profit +28% CER Performance
+45% AER
£92.3m • In Spain, Sanitas Seguros delivered good growth, driven by
partnerships and improvements to customer experience
(HY 2016: £71.9m CER)
• Sanitas Hospitales enhanced digital capability through
Revenue by business acquisition of Healthia sports medicine business
• Sanitas Mayores acquired five care homes; Occupancy rates at
95%
• Profit growth in Bupa Chile despite challenging market
conditions, driven by higher premiums and activity; Clínica Bupa
Santiago hospital expected to open 2018
• LUX MED in Poland delivered significant growth in revenues
due to good performance in ambulatory business
10Overview Market unit performance Financial review Outlook & operating priorities
International Markets
Growth in revenues but Bupa Global challenges continue to impact
profitability
Operating Environment
Revenue(1) +15% CER
• Less favourable economic conditions in Saudi Arabia
£862.8m +27% AER
• Intense competition for IPMI
(HY 2016: £751.4m CER)
Underlying profit(1)
Performance
-25% CER
-18% AER • Bupa Global customer mix changes and higher loss ratios
£25.7m • Increased stake in Bupa Arabia to 34.25%; continues to deliver
(HY 2016: £34.4m CER) good customer and revenue growth
Revenue by business(2) • Acquisition of Care Plus in Brazil had positive impact on
performance; integration on track
• Bupa Hong Kong performance on target benefitting from strong
renewals and pricing improvements; Continued expansion of
Quality HealthCare clinics business with three new facilities
• Divestment of Bupa Thailand to Aetna announced 25 July
(1) Revenue of £862.8m does not include the revenues of our equity accounted associates (Max Bupa, India, Bupa Arabia and Highway to
Health, part of Bupa Global North America). Our appropriate share of profit from these businesses is included in underlying profit.
(2) Chart includes 100% of Bupa revenues from all businesses to give a sense of scale 11Overview Market unit performance Financial review Outlook & operating priorities
Section 3
Financial
review
Martin Potkins, Corporate Controller
Gareth Evans, Group Treasurer
12Overview Market unit performance Financial review Outlook & operating priorities
HY 2017 Financial overview
Financial highlights
Completion of transactions impacts solvency and funding metrics at the
half year as expected
Solvency capital coverage 160% (1)
Short-term funding refinanced via £300m senior bond
Continued strong cash generation
(1) The Solvency II capital coverage ratio is an estimated value.
13Overview Market unit performance Financial review Outlook & operating priorities
HY 2017 Financial overview
Group grew revenues by 4% and underlying profit 11% – a good
result given local market conditions
Revenues
+4% at CER • Deepened and strengthened our market positions
HY 2017 £6.1bn
+15% at AER aided through a number of key transactions
HY 2016 (CER) £5.9bn
Underlying profit before tax(1)
+11% at CER • Growth in underlying profit is underpinned by good
HY 2017 £330.9m performances from ELA and the UK, driven by
+26% at AER
growth in Sanitas Seguros and the acquisition of
HY 2016 (CER) £298.5m Oasis Dental Care, respectively
(1) In order to reflect trading performance in a consistent manner year on year, a number of non-trading items that limit comparability are removed from our statutory profit before tax to arrive at underlying profit. This
distinguishes underlying profit from other constituents of the statutory profit before tax, excluding items relating to business combinations and disposals, fluctuations in foreign exchange, property revaluations and
investment returns on return-seeking assets, along with other one-off items.
14Overview Market unit performance Financial review Outlook & operating priorities
Statutory profit
Statutory profit up 66%
Revenues Statutory profit before tax
+4% at CER
HY 2017 £6.1bn
+15% at AER HY 2017 £231.3m +66% at AER
HY 2016 (CER) £5.9bn
HY 2016 (AER) £139.6m
Underlying profit before tax
+11% at CER
HY 2017 £330.9m +26% at AER • Reflects good trading performance in the first six
months of 2017. 2016 was negatively impacted by
HY 2016 (CER) £298.5m decision to redeem a securitisation
HY 2017 HY 2016
£m £m
Underlying profit before tax 330.9 261.7
Amortisation of intangible assets arising on business combinations (32.7) (22.9)
Net losses on disposal of businesses and transaction costs on business combinations (9.1) (2.6)
Net property revaluation (losses)/gains (42.4) 3.6
Realised and unrealised foreign exchange losses (26.8) (1.0)
Other Market Unit and central non-underlying items 0.5 (4.6)
Early termination of secured loan notes - (112.3)
Gains on return seeking assets, net of hedging 10.9 17.7
Total non-underlying items (99.6) (122.1)
Statutory profit before tax 231.3 139.6
15Overview Market unit performance Financial review Outlook & operating priorities
Solvency
Acquisitions have reduced solvency coverage to 160% as
expected
Revenues Statutory profit before tax
+4% at CER
HY 2017 £6.1bn HY 2017 £231.3m
+15% at AER +66% at AER
HY 2016 (CER) £5.9bn HY 2016 (AER) £139.6m
Underlying profit before tax Net cash generated from operating activities
+11% at CER
HY 2017 £330.9m HY 2017
+26% at AER £554.4m +8% at AER
HY 2016 (CER) £298.5m £513.4m
HY 2016 (AER)
Solvency II coverage ratio
HY 2017 (1) 160% -44% pts v FY16 HY 2017
HY 2017 (1) 160%
FY 2016 204% Own funds
FY 2016 Own funds
FY 2016 204%
HY 2016 180% HY 2016 180%
HY 2016 180% HY 2016 Own funds
Own funds £3.4bn
£3.4bn
SCR SCR £1.9bn
£1.9bn
(1) The Solvency II Capital Position (Own Funds and Solvency Capital
Requirement) and related disclosures are estimated values
16Overview Market unit performance Financial review Outlook & operating priorities
Solvency
Risk sensitivities
(1) Note: while this table only shows the impact of individual stresses, it is a helpful illustration of the relatively low risk inherent in our capital base.
17Overview Market unit performance Financial review Outlook & operating priorities
Solvency
Bridge from IFRS Net Assets to Solvency II Eligible Own Funds
30 June 2017 IFRS to SII Eligible Own Funds (£m)
8000
7000
6,802
6000
5000
4,266
4000
341
3000 1,310 14 3,378
367
241 13
2000 2,423
1000
0
IFRS Goodwill & Technical Participations Other SII EBS Sub debt Non-available Non-controlling Total SII
Intangibles Provisions recognised as Own Funds interest Net Own Funds
Capital Assets
• Goodwill & Intangibles are valued at nil for Solvency II purposes and therefore results in the biggest impact on own
funds
• Participations include the removal of implied goodwill within IFRS associate investments as this is not recognised in the
SII fair value calculation
• Total subordinated debt has remained unchanged since December 2016
18Overview Market unit performance Financial review Outlook & operating priorities
Solvency
Movement in Solvency II capital surplus from 31 December 2016
to 30 June 2017
Jun-18
3000
£m
2500
291
2000
1,091
1500
16
63
1000
2,142
1,263
500
0 (1) (2)
Solvency surplus Adjusted IFRS Net Assets Acquisitions in the period SCR Other Solvency surplus
31 December 2016 30 June 2017
(1) Note: Adjusted IFRS Net Assets include profit after tax of £169m adjusted to remove amortisation and impairment of goodwill and intangibles, deferred tax on intangible additions and other movements in reserves.
(2) Note: “Other” includes movements in Technical Provisions, Foreign Exchange and Non-available funds
19Overview Market unit performance Financial review Outlook & operating priorities
Solvency
Breakdown of SCR
HY 2017 FY 2016 HY 2016
Insurance risk 19% 19% 23%
Market risk 57% 60% 56%
Spread risk 3% 2% 2%
Equity risk 3% 2% 2%
Property risk 34% 34% 32%
Currency risk 11% 16% 12%
Pension scheme 6% 6% 8%
Counterparty risk 4% 4% 3%
Operational risk 11% 11% 11%
Participations (Associates and JVs) 8% 6% 7%
Total 100% 100% 100%
• There is no significant change to the profile of risk capital
• Property risk remains Bupa’s single largest risk component which relates primarily to our care home portfolio in the UK,
Australia, New Zealand and Spain
(1) The Solvency II Capital Position is our current estimate. Own Funds have been recalculated based on actual YTD performance while SCR represents our latest estimate.
20Overview Market unit performance Financial review Outlook & operating priorities
Cashflow
Cashflow remains strong
Revenues
+4% at CER
HY 2017 £6.1bn
+15% at AER
HY 2016 (CER) £5.9bn
Underlying profit before tax
+11% at CER
HY 2017 £330.9m
+26% at AER
HY 2016 (CER) £298.5m
Statutory profit before tax
HY 2017 £231.3m +66% at AER
HY 2016 (AER) £139.6m
Net cash generated from operating activities
HY 2017 £554.4m +8% at AER
HY 2016 (AER) £513.4m
21Overview Market unit performance Financial review Outlook & operating priorities
HY 2017 Financial overview
Increased leverage following acquisitions
Revenues Net cash generated from operating activities
+4% at CER
HY 2017 £6.1bn HY 2017 £554.4m +8% at AER
+15% at AER
HY 2016 (CER) £5.9bn HY 2016 (AER) £513.4m
Underlying profit before tax Solvency II coverage ratio
+11% at CER
HY 2017 £330.9m
+26% at AER HY 2017 160% -44% pts v FY16
HY 2016 (CER) £298.5m FY 2016 204%
HY 2016 180%
Statutory profit before tax
HY 2017 £231.3m +66% at AER
Leverage(1)
HY 2016 (AER) £139.6m
HY 2017 30.2% +7.6% pts v FY16
FY 2016 22.6%
HY 2016 24.3%
(1) Gross debt (including hybrid debt) / gross debt plus equity
22Overview Market unit performance Financial review Outlook & operating priorities
Funding
H1 funding activity to support M&A
Leverage (1)
• Leverage increased to 30.2% (FY16: 22.6%)
• Good cash repatriations
Jun-17
• £300m senior bond was issued in April to
Dec-16
refinance some short term acquisition financing
• £395m drawn on the RCF at HY17 Jun-16
• Stable Senior debt ratings A- (Fitch) and Baa1 Dec-15
(Moody’s)
Jun-15
Jun-18
Bank facility drawings (£m)
(2)
23
(1) Gross debt (including hybrid debt) / gross debt plus equity
(2) Amount reflects £6.4m of outstanding letters of credit on the RCFOverview Market unit performance Financial review Outlook & operating priorities
Cash and Financial Investments
Cash remains conservatively managed
• £3.9bn cash and financial investments CASH AND INVESTMENT PORTFOLIO
• Approximately 85% of portfolio held in investments rated
HY17 £3.9bn
at least A-/A3
• £400m return-seeking assets (externally-managed bond FY 16 £3.6bn
and loan funds) held in UK and Australian regulated
entities HY 16 £3.6bn
• Good returns in HY17 from bond and loan portfolio Cash (e.g. deposits, liquidity funds)
Return seeking assets
£10.5m (HY16 £17.5m)
• Low yield environment continues to provide a
challenging investment backdrop
Jun-18
CASH AND INVESTMENTS BY LEGAL ENTITY (%) HY17 CASH AND INVESTMENTS BY CREDIT RATING (%)
24Overview Market unit performance Financial review Outlook & operating priorities
Section 4
Outlook and
operating
priorities
Evelyn Bourke, Group CEO
25Overview Market unit performance Financial review Outlook & operating priorities
Outlook and operating priorities
Market conditions to remain testing in 2017; we are focused
on continuously improving the customer experience
Outlook:
• Demand for high quality, value-for-money healthcare
expected to remain strong
• Conditions in key markets expected to remain testing for
remainder of 2017
• Continuing to navigate volatile political and economic
environments, including UK withdrawal from EU
• Changing customer standards of personalisation, ease
and choice; high expectations of quality, safety, privacy
and transparency
Operating priorities:
• Continuously improving the customer experience
• Empowering our people to deliver for our customers
• Investing in the strength and depth of our market leading
businesses
• Disciplined capital management
• Focus on management of risk and compliance, upholding
the high standards our customers and regulators expect
26Overview Market unit performance Financial review Outlook & operating priorities
Questions
and answers
27Overview Market unit performance Financial review Outlook & operating priorities
Further information
• For further information or to request a follow-up call or meeting, email
ir@bupa.com
• All financial results and 2016 SFCRs for Bupa Group and Bupa Insurance
Limited available on www.bupa.com/Corporate/our-performance
28Overview Market unit performance Financial review Outlook & operating priorities
Appendices
29Overview Market unit performance Financial review Outlook & operating priorities
Appendix
Organisation structure
Market Units
Australia and UK Europe & International
New Zealand Latin America Markets
• Bupa Health Insurance • Bupa UK Insurance • Sanitas Seguros • Bupa Global
• Bupa Health Services • Bupa Care Services • Sanitas Hospitales and • Bupa Arabia
• Bupa Aged Care Australia New Services
• Bupa Health Services • Bupa Hong Kong
• Bupa New Zealand • Sanitas Dental
• Bupa Cromwell Hospital • Quality HealthCare
• Sanitas Mayores (Hong Kong)
• Bupa Dental UK (1)
• LUX MED • Max Bupa (India)
• Bupa Chile • Bupa China
• Bupa Thailand (2)
(1) Bupa completed the purchase of Oasis Dental Care on 09 February 2017
(2) Bupa Thailand sold 25 July 2017
30Overview Market unit performance Financial review Outlook & operating priorities
Appendix
Bupa’s footprint and participation
Australia and Europe and Latin
UK International Markets
New Zealand America
New Bupa Hong Saudi Thailand (1)
Australia UK Spain Chile Poland India
Zealand Global Kong Arabia (1) (2)
(3)
Private medical insurance
Pay-as-you-go
Funding
Dental insurance
Travel insurance
(4) (5)
Clinics
Hospitals
Healthcare
provision
Dental clinics
Optical
(6)
Care homes
Aged care
provision (7)
Retirement villages
(1) Bupa Arabia in Saudi Arabia and Max Bupa in India are associate businesses
(2) Bupa Thailand sold July 2017
(3) Global international insurance available in most countries. Includes 49% stake in Highway to Health (GeoBlue) in
the US
(4) Domestic insurance and clinics in Brazil 31
(5) In addition to Quality HealthCare Hong Kong, two clinics in development in Guangzhou, China
(6) Home healthcare rather than care homes
(7) In addition to care homes, New Zealand also has brain rehabilitation and home alarm businessesOverview Market unit performance Financial review Outlook & operating priorities
Appendix
Breakdown of borrowings
HY 2017 FY 2016 HY 2016
£m £m £m
Borrowings under £800m bank facility 395 - 90
Acquisition facility 353 - -
£350m senior bond due 2016 - - 363
£330m perpetual hybrid bond (g’teed by Bupa Insurance Ltd) 389 387 407
£350m senior bond due 2021 348 348 348
£500m subordinated bond due 2023 501 501 500
£300m senior bond due 2024 295 - -
£400m subordinated bond due 2026 395 395 -
Bupa Chile borrowings 185 207 197
Other 87 83 83
Total borrowings 2,948 1,921 1,988
32Overview Market unit performance Financial review Outlook & operating priorities
Disclaimer
Cautionary statement concerning
forward-looking statements
This document may contain certain “forward-looking statements”. Statements that are not historical facts,
including statements about the beliefs and expectations of the British United Provident Association Limited Group
(“Bupa”) and Bupa’s directors or management, are forward-looking statements. In particular, but not exclusively,
these may relate to Bupa’s plans, current goals and expectations relating to future financial condition, performance
and results.
By their nature, forward-looking statements involve risk and uncertainty because they relate to events and
depend upon future circumstances that may or may not occur, many of which are beyond Bupa’s control and all of
which are solely based on Bupa’s current beliefs and expectations about future events. These circumstances
include, among others, global economic and business conditions, market related risks such as fluctuations in
interest rates and exchange rates, the policies and actions of governmental and regulatory authorities, the impact
of competition, the timing, impact and other uncertainties of future mergers or combinations within relevant
industries. Such forward-looking statements involve known and unknown risks, uncertainties and other factors,
which may cause the actual future condition, results, performance or achievements of Bupa or its industry to be
materially different to those expressed or implied by such forward looking statements. Other than as required by
law, Bupa expressly disclaims any obligations or undertakings to release publicly any updates or revisions to any
forward-looking statements to reflect any change in the expectations of Bupa with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.
The information contained in this presentation is intended to be read in conjunction with, and not as a substitute
for, Bupa’s half year statement for the six months ended 30 June 2017 (the “HY17 Report”). In the event of any
inconsistency, the HY17 Report should be considered to prevail.
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