- Revenue1 of £12.1bn is flat at constant exchange rates (CER).
- Underlying profit2 before taxation of £388m, was down 4% at CER (2019: £404m) with the performance of the insurance businesses partially offset by the challenging conditions in our health provision and aged care businesses.
- Statutory profit before taxation of £410m was up £488m at AER (2019 loss before taxation: £(78)m), primarily due to goodwill impairments made in 2019 not recurring.
- Solvency II capital coverage ratio3 remains strong at 160% (2019: 159%).
- Full Year 2020 results reflect our financial resilience and the benefits of our diversified business despite volatile trading conditions caused by the COVID-19 pandemic.
- Throughout the pandemic, our priority is to focus on the welfare of our customers and our people, and to play our part in government and public health responses.
- For health insurance, our largest business line, we undertook a range of actions to support our customers and deliver value. Underlying profit primarily increased due to the reduced levels of claims, as lockdown measures restricted access to private healthcare and postponed elective procedures. As restrictions had largely been lifted by the end of the year it is anticipated that claims will rebound in 2021, however, the timing and quantification will vary by market.
Iñaki Ereño, Group CEO, commented:
“The pandemic is having a terrible impact across the world at a very human level. In the context of that huge challenge, I am very proud of how everyone at Bupa has been responding, focusing on our customers and supporting each other and society. Our financial results reflect our financial resilience and the benefits of our diversified business. Despite volatile market and trading conditions we maintained revenue flat with underlying profit marginally down.
Looking forward, it is an important time for Bupa and for the healthcare industry. COVID-19 has changed many aspects of society and this will continue. I am proud to lead Bupa in this new period as we deliver for customers and play our part in national health efforts. My focus is on growth, transformation and sustainability. We must grow the businesses of today and innovate to become the business of tomorrow.”
Market performance (all at CER)
- Australia and New Zealand: Revenue increased by 3% to £4,737m largely due to the Australian Defence Force contract which started in July 2019. Underlying profit was £113m, a decrease of 28%, as Australian Health Insurance declined, and with losses in Australian Aged Care and a decline in profit in New Zealand Aged Care.
- Europe and Latin America: Revenue grew by 3% to £3,765m and underlying profit grew by 19% to £184m mainly driven by our insurance businesses, partially offset by the performance in our provision and aged care businesses.
- Bupa Global and UK: Revenue was down by 6% to £3,122m, with underlying profit down 5% to £110m. This was driven by performance in our health provision and aged care businesses, and our pledge to pass back any exceptional financial benefit ultimately arising from the pandemic to UK private medical insurance (PMI) customers (UK return of premium commitment).
- Other businesses: Revenue was flat at £494m. Underlying profit was up 33% to £61m partly reflecting favourable performance in Bupa Arabia and our increased shareholding.
- Solvency II capital coverage ratio of 160% (2019: 159%).
- Leverage is 32.4% (2019: 32.7%) when accounting for IFRS 16 lease liabilities. Excluding these liabilities, the leverage ratio is 25.3% (2019: 25.1%).
- Net cash generated from operating activities was £1,343m, up £646m on prior year (2019: £697m) reflecting the delay in claims outflows in the insurance businesses.
- In March 2020, 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 its outlook from stable to negative.
Our response to COVID-19
- COVID-19 has been a human tragedy and very sadly, lives were lost among our residents, customers, patients and employees as the pandemic impacted countries at different stages during 2020.
- Throughout the pandemic our priority has been to focus on the welfare of our customers, and our people, and to play our part in national health efforts. We invested to protect and support our customers and our people, ensure operational resilience, and to deliver new and innovative services.
- In insurance, we accelerated digital programmes to make sure customers could continue to access treatment and care:
- In Australia, we increased telehealth and mental health support services, developing new ways for customers to access treatment remotely.
- In Spain, we launched BluaU, the second generation of our Blua digital proposition. We increased our digital customers by 24% year on year and delivered over 640,000 video consultations, 15 times higher than 2019.
- In the UK, we enhanced services to provide remote, direct access to GPs, physiotherapists and nurses, and consultants via video or phone. Use of our Digital GP service increased to around 5,000 appointments per week.
- In addition to the UK PMI return of premium, we undertook targeted actions across our markets to support our insurance customers. Actions varied on the basis of local market context and product set and included: removing pandemic exclusions for COVID-19; reviewing excess clauses; delaying approved premium increases in Australia and Chile; providing free access to virtual consultations in Spain through Blua; and supporting customers experiencing financial hardship.
- In health provision, our hospitals and clinics in Spain, Chile, Hong Kong, Poland and the UK worked in partnership with public health systems. Lockdowns led to temporary closures of clinics and dental practices in some markets. We adapted services in line with local requirements and expanded virtual health services. Our dental businesses increased virtual services to continue giving consultations and provide advice. When lockdowns eased, we were able to resume face-to-face services with new safety measures in place to protect customers and our people.
- In aged care, protecting residents and staff remains our absolute focus, with comprehensive safety measures introduced and investment in safety equipment, staff training and support. Our teams have been supporting and caring for our residents and worked hard to maintain their connections with families and loved ones using technology.
- Keeping our people safe and taking care of their mental health were key priorities. We expanded services such as 24/7 helplines, access to psychological services, virtual sessions to build resilience and mindfulness, and direct support such as counselling. We enabled our colleagues on the frontline to continue to work safely by implementing enhanced cleaning regimes in facilities, providing Protective Personal Equipment (PPE) and training on specialist equipment. We facilitated remote working wherever possible through technology.
- We established a global Healthy Communities Fund to support local charities. This has a particular focus on supporting those affected by the pandemic, and mental health and resilience in schools.
- We continued to support the work of the Bupa Foundations in Australia, the UK and Spain, and encourage our people to contribute time and skills to the communities in which we operate.
Note on insurance reserving
- In the early stages of the pandemic, government restrictions across many of our markets affected insurance customers’ ability to access treatment in private healthcare facilities and make claims, particularly for elective procedures. Although health insurance industry practice is to account for claims when a medical service is delivered, this restriction on supply at half year gave rise to a constructive obligation for us to ensure claims were honoured, even if the treatment were to postdate a customer’s contract period. This led us to hold reserves for deferred claims at half year.
- As at year end, however, these restrictions have largely been removed and claims volumes are rebounding and no such obligation to provide beyond contractual terms exists (except for Australia, as described below). The quantum and timing of this ongoing rebound in claims gives some uncertainty as we head into 2021, and the ultimate impact will vary by geography, policy coverage terms and broader circumstances.
- This uncertainty is largely mitigated in Australia, where the prudential regulator requires all health insurers to hold an additional reserve for deferred claims, creating an obligation beyond normal contractual liabilities, for which we are carrying a provision of £171m representing the best estimate of the rebound together with a risk margin.
- Further, in the UK PMI business, we are holding a provision of £145m for our UK return of premium commitment.
- We increased our shareholding in Bupa Arabia by 4% to 43.25%.
- We enhanced our liquidity and debt maturity profiles through two bond issues together raising £650m. We redeemed £330m of bonds issued in 2004.
- We strengthened our internal ESG governance, embedded a new emissions reporting tool and progressed the development of a new Environment and Climate Action plan.
- We strengthened our approach to inclusion and diversity.
- Our MSCI ESG rating was upgraded to ‘A’ in December 2020.