Half year results presentation 6 months ended 30 June 2018
HY 2018 results presentation Agenda Section 1 Overview Section 2 Market Unit performance Section 3 Financial Review Joy Linton CFO Section 4 Outlook and operating priorities Section 5 Questions and answers Martin Potkins Gareth Evans Corporate Controller Group Treasurer 2
Section 1 Overview Joy Linton CFO 3
Customer focus delivers stable performance in tougher conditions Leverage Revenue 0% CER £5.9bn 24.5% FY2017: 25.3% -3% AER Solvency coverage ratio (1) Underlying profit before tax +9% pts vs -13% CER 189% £280.3m -15% AER FY2017 Moody’s senior debt Statutory profit before tax rating upgraded to A3 £256.6m +11% AER Fitch stable at A- 4 (1) The HY18 Solvency II capital position, SCR and coverage ratio are estimates
HY 2018 Group highlights Other key highlights Completed the sale of 22 care homes in the UK Proposed a further 5% increase in our stake in Bupa Arabia Continued emphasis on our customers and digital innovation Strengthened our focus on privacy and information security controls 5
Section 2 Market Unit performance Joy Linton CFO 6
Australia and New Zealand Stable performance in a difficult market environment Operating environment Revenue • Low economic and wage growth are affecting household discretionary £2,325.2m +2% CER spend and consumer confidence -5% AER • Increasing expectations for large businesses from consumers, wider (2017 HY: £2,281.1m CER) community and regulators Underlying profit • Governments in Australia and New Zealand have tightened funding of aged care £154.0m +1% CER -6% AER (2017 HY: £151.8m CER) Performance • Stable revenue and profit in Bupa Health Insurance Revenue by business • New Customer Relationship Management (CRM) system, allowing us to personalise our service to customers BUPA BUPA VILLAGES HEALTH AND AGED INSURANCE • Revenue and profit growth in Health Services. We completed a CARE 82% AUSTRALIA strategic review of the business to provide a strong foundation for AND NEW future growth ZEALAND 11% • Aged care business in Australia achieved stable performance with average occupancy rate of 95%; in New Zealand, we completed the BUPA sale of 12 care homes and four retirement villages and of our medical HEALTH SERVICES alarm business 7% 7
Europe and Latin America Positive revenue growth across all of our businesses in Spain, Poland and Chile Operating environment • In Spain, the economy is projected to grow at 2.8% this year Revenue • Political environment in Spain is more stable after change of government in £1,516.5m +6% CER +8% AER June (2017 HY: £1,424.3. CER) • In Poland, growth is expected to remain strong throughout 2018, with private consumption growing fast due to a buoyant labour market Underlying profit • Following a change in government, the Chilean economy is recovering and £88.2m -6% CER forecast to grow at 3.6% in the coming years -4% AER (2017 HY: £94.0m CER) Performance • In Spain, Sanitas Seguros delivered a stable performance, with good Revenue by business contribution on customer numbers from Blua, our digital proposition BUPA SANITAS CHILE SEGUROS • Sanitas Hospitales treated 31% more patients due to a growing portfolio in 33% 37% health insurance • Sanitas Mayores performed well; launched Sanitas En Casa Contigo SANITAS (Sanitas At Home) service HOSPITALS SANITAS AND NEW • LUX MED in Poland delivered robust revenue growth, driven by an increase MAYORES SERVICES 5% 9% in corporate and self-pay customers SANITAS • Opened first phase of Clínica Bupa Santiago – a £140m investment. When LUX MED DENTAL 11% 5% completed, will have a capacity of 460 beds 8
United Kingdom Good performance on a like-for-like basis, driven by health insurance and dental Operating environment Revenue • Economic growth in the UK is slow; medical cost inflation continues to £1,251.5m -9% outstrip price inflation • Uncertainty remains around the full implications of Brexit and concerns (2017 HY: £1,369.6m) that restricted access to the EU workforce will worsen the shortage of nurses and medical professionals Underlying profit • In aged care, demand for local authority-funded beds continues to £62.3m -26% increase but public funding remains constrained (2017 HY: £84.6m) Performance Revenue by business • Strong profit growth in Bupa UK Insurance due to improvements in loss ratios BUPA BUPA UK HEALTH INSURANCE • Continue to strengthen our market position in dental care by acquiring SERVICES 61% 6% practices – we have over 470 across the UK and Ireland • Bupa Care Services revenue and profits down, mainly due to the sale of parts of our business; continued commitment to the sector with four BUPA CARE SERVICES new homes opened in H1 2018 16% • Invested in health clinics, opened new centres at our Cromwell BUPA Hospital and in Glasgow, as well as trialling a partnership with DENTAL CARE 17% Waitrose 9
International Markets Revenue and profit down driven by expected continued profit decline in Bupa Global and disposal of Bupa Thailand Operating environment Revenue • Economic and regulatory environments in our markets continue to evolve £785.8m -2% CER • Customer experience remains an increasingly important differentiator, with a focus -9% AER on omnichannel capability (2017 HY: £802.7m CER) • IPMI market remains competitive, particularly from leading regional competitors, Underlying profit (1) domestic insurers providing richer benefits and global players leveraging local licenses and distribution networks to build IPMI £11.7m -48% CER -54% AER Performance (2017 HY: £22.7m CER) • Bupa Global continues to be impacted by strategic repositioning we began a Revenue by business (2) number of years ago, to focus on selected strategic markets • Submitted application for the authorisation of a new insurance entity in Ireland to MAX BUPA (INDIA) BUPA enable Bupa Global to continue relationships with EEA customers after the UK 2% GLOBAL 57% leaves the EU • In Colombia, launched our first IPMI product in partnership with Seguros Bolivar • Hong Kong achieved solid revenue growth. Continued to focus on customer retention in all channels, and opened our first Bupa-branded dental clinic HONG KONG • Proposed to increase our stake in Bupa Arabia by a further 5% to 39.25% 17% • In India, our associate business, Max Bupa, launched GOActive health insurance BUPA ARABIA 24% plan - its first digital product 10 (1) While revenues from our associates and joint ventures are excluded from our reported figures, customer numbers and the appropriate share of profit from these business are included in our reported numbers (2) Chart includes Bupa’s revenues from all businesses including our share of revenues from associates to give a sense of scale
Section 3 Financial Review Martin Potkins Gareth Evans Corporate Group Controller Treasurer 11
HY 2018 Financial overview Financial highlights Solvency capital Leverage down Net cash flow down coverage 189% (1) since December 13% 12 (1) The HY18 Solvency II capital position, SCR and coverage ratio are estimates
HY 2018 Financial overview Revenues Underlying profit before tax (1) Combined operating ratios (2) +0% at CER -13% at CER Group HY 2018 £5.9bn HY 2018 £280.3m -3% at AER -15% at AER HY 2018 94% HY 2017 (CER) £5.9bn HY 2017 (CER) £320.9m HY 2017 95% • Underlying profit decreased by 13% • Revenue was flat at £5.9bn, but grew by 4% on a like-for-like basis • Excluding divestments, underlying Insurance regulated entities profit decreased by 4% on a like-for- • Insurance revenue broadly like basis unchanged from the position at full HY 2018 93% Bupa HI Pty Ltd year (Australia) HY 2017 93% HY 2018 94% Bupa Insurance Ltd (UK) HY 2017 98% HY 2018 91% Sanitas S.A. de Seguros (Spain) HY 2017 91% (1) To derive underlying profit, profit before taxation is adjusted for amortisation and impairment of intangible assets and goodwill arising on business combinations, net property revaluation gains or losses, realised and unrealised foreign exchange gains and losses, gains or losses on return seeking assets, profits or losses on 13 the sale of businesses and fixed assets, transaction costs on acquisitions and disposals, restructuring costs and other one-off items (2) Combined operating ratio is calculated based on incurred claims and operating expenses divided by net earned premiums. These are calculated based on local reporting or regulatory requirements
Statutory profit Statutory profit up 11% Statutory profit before tax HY 2018 HY 2017 (AER) £m £m +11% at AER HY 2018 £256.6m Underlying profit before tax 280.3 330.9 Amortisation and impairments of intangible assets HY 2017 (AER) £231.3m (33.8) (32.7) and goodwill arising on business combinations Net gains on disposal of businesses and transaction 8.0 (9.1) • Higher statutory profit due to positive movements costs on business combinations in property revaluations and foreign exchange Net property revaluation gains/(losses) 0.6 (42.4) compared to 2017 Realised and unrealised foreign exchange 4.8 (26.8) gains/(losses) Other Market Unit non-underlying items 0.6 - (Loss)/gains on return seeking assets, net of (4.2) 10.9 hedging Central non-underlying items 0.3 0.5 Total non-underlying items (23.7) (99.6) Statutory profit before tax 256.6 231.3 14
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