Bupa Finance plc half year financial results 2020

Key points

• Half Year 2020 results reflect the impact of the COVID-19 pandemic across all of Bupa, although the operational impact varied by line of business and by geography
• Disruption caused by COVID-19 to our healthcare provision and aged care businesses during the period, along with reduced investment earnings, more than offset the improved profit performance in our insurance businesses
• Our priority has been to focus on the welfare of our customers, our people and society, and play our part in government and public health responses to COVID-19
• Revenue¹ £5.8bn, down 3% at AER (2019: £6bn); flat at constant exchange rates² (CER) (2019: £5.8bn)
• Statutory profit before taxation £191m, down £66m at actual exchange rates (AER) (2019 profit before taxation: £257m)
• Underlying profit before taxation³ £178m, down 26% at AER (2019: £242m); down 26% at CER (2019: £240m)
• Solvency II capital coverage ratio⁴ of 169% (FY 2019: 159%)

Performance review

Our results reflect the disruption caused by COVID-19 across our businesses. We are very proud of how our people have responded to the challenge of the pandemic. They have focused on our customers, while contributing to national responses, often in the toughest of circumstances.

Across our insurance businesses, claims temporarily reduced due to restrictions on access to hospitals. We expanded telehealth and digital healthcare services so customers could continue to access care. In insurance, we have reserved prudently as we expect to pay increased claims as our customers access treatments delayed by lockdowns. As restrictions have started to ease, we have reopened our healthcare provision services, with the requisite safety measures in place, and activity levels are returning.

COVID-19 means we are operating in a time of significant uncertainty. We are actively managing our financial position, ensuring Bupa remains financially strong, so we can continue to invest in organic growth in our chosen markets, in technology capabilities and operational resilience.”

Market performance⁵ (CER)

• Australia and New Zealand: revenue up by 4% to £2,238m at CER with the new Australian Defence Force (ADF) contract driving growth. Underlying profit was £60m, a decrease of 32% at CER driven by losses in our Australian aged care businesses mainly due to occupancy challenges arising from the previously reported compliance issues which we have been successfully addressing, and from COVID-19, along with higher costs of operations.
• Europe and Latin America: revenue is up by 3% to £1,827m and underlying profit growth of 2% to £85m at CER mainly driven by growth in our insurance businesses offset by how our provision and aged care businesses were impacted by lockdowns and restrictions caused by COVID-19.
• Bupa Global and UK: revenue was down by 7% to £1,532m, with underlying profit down 57% to £26m at CER mainly due to the impact of COVID-19 related lockdowns and restrictions, particularly in our aged care, dental and clinics businesses.
• Other businesses: revenue is stable at £243m. Underlying profit is up 84% to £35m, mainly reflecting the growth in Bupa Arabia.

Financial position

• Net cash generated from operating activities was £930m, up £424m on prior year (2019: £506m) reflecting the delay in claims outflows in the first half
• Solvency II capital coverage ratio of 169% (FY 2019: 159%)
• Leverage ratio of 29.1% (FY 2019: 26.6%). Leverage is 36.4% (FY 2019: 34.6%) when IFRS 16 lease liabilities are taken into account
• In March Fitch downgraded Bupa Finance plc’s Long-Term Issuer Default Rating (LT IDR) to ‘A-’ from ‘A’, and senior and unguaranteed subordinated bonds to BBB+ and BBB- respectively. In April, Moody’s affirmed the senior and subordinated debt ratings of Bupa Finance plc, while changing outlook from stable to negative

Operational responses to COVID-19

Our focus on our customers and our people, together with the continued emphasis on Bupa’s values, was an important foundation of our response to the pandemic.

• In health insurance, we accelerated our telehealth and digital healthcare services so customers could continue to access care and advice. We also took targeted action in our markets such as removing pandemic exclusions as they relate to COVID-19, delaying approved premium increases, reviewing excess clauses, and supporting those experiencing financial hardship.
• In health provision, our hospitals and clinics supported the national public health response across different countries, treating COVID-19 patients and providing capacity to the public health systems. Our hospitals in Spain, Poland and Chile treated thousands of COVID-19 patients as part of the national responses. In Spain, we doubled the number of Intensive Care Unit (ICU) beds and constructed two field hospitals. In the UK, the Cromwell Hospital treated cancer and cardiology patients on behalf of the NHS, and some of our clinical staff were deployed to the NHS 111 helpline. Although many of our dental practices were closed for a period in line with local public health advice, we kept services open for emergency treatments.
• In our four aged care businesses we have supported and cared for residents, while ensuring our people could operate safely, always working in close collaboration with local health authorities
• Our people have played a huge part in the COVID-19 response, working on the front line to support customers and contribute to the national responses. We swiftly enacted remote working capabilities wherever possible, and nearly all our people worldwide have been able to continue to work effectively through the pandemic.

Operational highlights

• Our total number of health insurance customers grew to 18m (FY 2019: 17.5m)
• In June, we enhanced our liquidity and capital position through two bond issues together raising £650m
• In June, we announced an agreement to increase our shareholding in Bupa Arabia by 4% to 43.25%
• We sharpened our focus on Environmental, Social and Governance (ESG) priorities with the creation of a Healthy Communities Fund

Notes to editor

¹ Revenues from associate businesses are excluded from reported figures. Customer numbers and economic share of post-tax profits from our associate businesses are included.

² All figures are at constant exchange rates (CER) unless stated. We use CER to compare trading performance in a consistent manner to the prior year. We have restated 2019 results to 2020 average exchange rates.

³ Underlying profit is a non-GAAP financial measure. This means it is not comparable to other companies. Underlying profit reflects our trading performance and excludes a number of items included in statutory profit before taxation, to facilitate year-on-year comparison. These items include impairment of intangible assets and goodwill arising on business combinations, as well as market movements such as gains or losses on foreign exchange, on return-seeking assets, on property revaluations and other material items not considered part of trading performance. A reconciliation to statutory profit before taxation can be found in the notes to the condensed consolidated financial statements.

⁴ The 2020 Solvency II capital coverage ratio is an estimate and unaudited. It represents the position of the Parent (The British United Provident Association Ltd)

⁵ At the 2019 half year, we announced the simplification of our organisation into three Market Units: Australia and New Zealand; Europe and Latin America; and Bupa Global and UK. We are reporting in accordance with this new structure and have restated our comparator results, where applicable.

Enquiries

Media

Rupert Gowrley (Corporate Affairs): [email protected]

Investors

Gareth Evans (Treasury): [email protected]

About Bupa Finance plc

Bupa Finance plc (the Company) is a company incorporated in England and Wales. The condensed consolidated half year financial statements comprise the financial results and position of the Company and its subsidiary companies (together referred to as the Group). The immediate and ultimate parent of the Company is The British United Provident Association Limited (the Parent), which is also the ultimate parent company of the Bupa Group (Bupa).

Bupa's purpose is helping people live longer, healthier, happier lives. With no shareholders, our customers are our focus. We reinvest profits into providing more and better healthcare for the benefit of current and future customers.

Health insurance accounts for the major part of our business with 18m customers and contributes 74% of revenue. We operate clinics, dental centres and hospitals in some markets. We run aged care businesses in the UK, Australia, New Zealand and Spain.

We directly employ around 83,000 people, principally in the UK, Australia, Spain, Chile, Poland, New Zealand, Hong Kong, Turkey, Brazil, the US, Middle East and Ireland. We also have associate businesses in Saudi Arabia and India.

About Bupa

Bupa's purpose is helping people live longer, healthier, happier lives and making a better world.

We are an international healthcare company serving over 31 million customers worldwide. With no shareholders, we reinvest profits into providing more and better healthcare for the benefit of current and future customers.

We directly employ around 85,000 people, principally in the UK, Australia, Spain, Chile, Poland, New Zealand, Hong Kong SAR, Turkey, Brazil, Mexico, the US, Middle East and Ireland. We also have associate businesses in Saudi Arabia and India.