Full year results presentation 12 months ended 31 December 2017 1
Agenda FY 2017 results presentation Agenda Section 1 Overview Section 2 Market Unit performance Section 3 Evelyn Bourke Group CEO Joy Linton CFO Financial Review Section 4 Outlook and operating priorities Section 5 Questions and answers Martin Potkins Corporate Controller Gareth Evans Group Treasurer 2
Overview Market unit performance Financial review Outlook & operating priorities Overview Evelyn Bourke Group CEO 3 3
Overview Market unit performance Financial review Outlook & operating priorities Overview FY 2017 Group highlights Good progress against our strategic framework 4
Overview FY 2017 Group highlights Underlying profit before tax Revenue £12.2bn £805.3m +5% CER +10% CER Net cash generated from operating Solvency coverage ratio (1) activities 180% £929.4m +4% AER +20% pts vs HY 2017 15.5m Customers Insurance Employee Net Promoter Score (eNPS) 14.5m Provision +38 +8pts 23,300 Aged care (1) The 2017 Solvency II capital position, SCR and coverage ratio are estimates 5
Overview Market unit performance Financial review Outlook & operating priorities Market Unit performance Joy Linton CFO 6
Overview Market unit performance Financial review Outlook & operating priorities Market Unit performance Australia and New Zealand Solid growth in both revenue and profit despite challenging ongoing economic conditions Performance Operating environment − Revenue and profit growth for Bupa Health Insurance, despite slower − Continuing pressure on domestic PMI overall health insurance market growth affordability; first reduction in 13 years in − Growth in health services business, driven by dental and Bupa Medical Australians with hospital cover Visa Services, with partnership extended by two years − Continued work with the Australian − Australian aged care business negatively impacted by Government’s Government to support broader health reform to improve affordability reduced sector funding − Aged care business in New Zealand continues to deliver revenue growth Revenue Customers Revenue by business +4% CER £4,926.6m 4.0m +13% AER Insurance (FY 2016: £4,730.0m CER) 1.7m Underlying profit +3% CER Provision £384.7m +12% AER 11,000 (FY 2016: £375.1m CER) Aged care 7
Overview Market unit performance Financial review Outlook & operating priorities Market Unit performance United Kingdom Delivered good performance; health insurance and acquisition of Oasis Dental Care were key Performance Operating environment − Government increased Insurance − Acquisition of Oasis Dental Care; strengthening market position with over Premium Tax to 12%, affecting two million dental patients affordability for insurance customers − Health insurance performance strong; enhanced care pathways and better − Aged care remains under pressure in healthcare cost management improving customer experience and claims the public sector performance − Uncertainty remains around the full − Significantly reshaped our aged care business; selling a number of homes implications of Brexit while investing in the quality of our retained care home and village portfolio Revenue Customers Revenue by business +1% CER £2,807.2m 2.2m Insurance (FY 2016: £2,785.9m CER) 3.0m Underlying profit Provision +19% CER £231.1m 6,600 (FY 2016: £194.9m CER) Aged care 8
Overview Market unit performance Financial review Outlook & operating priorities Market Unit performance Europe and Latin America Good revenue and profit growth, as we continue to use technology to improve our service to customers Performance Operating environment − Spanish politics stable; though political − Sanitas Seguros delivered good growth; driven by partnerships and situation in Catalonia is uncertain improvements to customer experience − Polish regulatory changes may affect − Sanitas Dental experienced excellent profit growth; better contribution from access to publically funded healthcare both dental centres and dental insurance − In Chile, economy is recovering; recent − Sanitas Mayores acquired five care homes and opened a new one in presidential elections expected to Barcelona; total of 46 care homes in Spain increase consumption − In Poland, LUX MED delivered strong growth; good performance in its ambulatory business − Growth in Bupa Chile despite market and regulatory changes; driven by higher outpatient and inpatient activity Revenue Customers Revenue by business +7% CER £2,869.0m 3.1m +16% AER Insurance (FY 2016: £2,679.6m CER) 8.9m +10% CER Underlying profit Provision +19% AER £197.1m 5,700 (FY 2016: £179.4m CER) Aged care 9
Overview Market unit performance Financial review Outlook & operating priorities Market Unit performance International Markets While revenue grew in 2017, underlying profit declined due to Bupa Global Performance Operating environment − IPMI market remains competitive − Ongoing transition in Bupa Global led to customer mix changes and higher loss ratios − Challenging operating environment in − Acquisition of Care Plus in Brazil in late 2016; integration on track Saudi Arabia; increasing regulation and competition − Increased stake in Bupa Arabia to 34.25%; and sold our business in Thailand − Economic outlook in Hong Kong remains − In Hong Kong, profit in health insurance business was strong and Quality stable; competition is strong HealthCare clinics continued expansion − In India, the health insurance sector − In India, Max Bupa, our associate insurance business, delivered very strong continues to grow; penetration and customer and revenue growth healthcare expenditure remain low Revenue by business (2) Revenue Customers +11% CER £1,647.1m 6.2m MAX BUPA BUPA (INDIA) GLOBAL +15% AER 1% 59% Insurance (FY 2016: £1,487.1m CER) BUPA THAILAND 0.9m 2% -18% CER Underlying profit (1) Provision -14% AER BUPA HONG KONG £56.6m 17% BUPA ARABIA 21% (FY 2016: £69.2m CER) (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 Chart includes Bupa’s revenues from all businesses including our share of revenues from associates to give a sense of scale. Bupa Thailand sold July 2017 (2) 10
Financial Review Martin Potkins Corporate Controller Gareth Evans Group Treasurer 11
Overview Market unit performance Financial review Outlook & operating priorities Financial Review FY 2017 Financial overview Financial highlights Continued good Leverage down Solvency capital cash generation since June following coverage 180% (1) and re-investment disposals in the business (1) The 2017 Solvency II capital position, SCR and coverage ratio are estimates 12
Financial Review FY 2017 Financial overview Continued growth in revenue and underlying profit Revenues − Revenue increased by 5% with solid growth in +5% at CER all Market Units £12.2bn FY 2017 +11% at AER − Health insurance remains around 70% of our revenue FY 2016 (CER) £11.7bn Underlying profit before tax (1) − Underlying profit growth in our largest Market Units – Australia and New Zealand, the UK, +10% at CER FY 2017 £805.3m and Europe and Latin America +15% at AER FY 2016 (CER) £732.7m Combined operating ratios Insurance regulated entities Group FY 2017 92% Bupa HI Pty Ltd FY 2017 93% (Australia) FY 2016 92% FY 2017 94% Bupa Insurance Ltd FY 2016 93% (UK) FY 2016 95% FY 2017 88% Sanitas S.A. de Seguros FY 2016 89% (Spain) (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 the sale of businesses and fixed assets, transaction costs on acquisitions and disposals, 13 restructuring costs and other one-off items
Financial Review Statutory profit Statutory profit up 19% Revenues Statutory profit before tax FY 2017 £12.2bn FY 2017 FY 2017 £12.2bn £12.2bn +19% at AER FY 2017 £620.3m FY 2016 (CER) £11.7bn £11.7bn £11.7bn FY 2016 (CER) FY 2016 (CER) £11.7bn FY 2016 (CER) FY 2016 (AER) £522.9m Underlying profit before tax − Reflects good trading performance in our FY 2017 £805.3m largest Market Units in 2017 FY 2017 £805.3m FY 2017 £805.3m − Revaluation loss in UK Care Services business FY 2016 (CER) £700.7m FY 2016 (CER) £732.7m FY 2016 (CER) in 2017. 2016 was negatively impacted by decision £732.7m to redeem a securitisation FY 2017 FY 2016 (AER) £m £m Underlying profit before tax 805.3 700.7 Amortisation and impairments of intangible assets and goodwill arising on business combinations (84.2) (70.7) Net gains on disposal of businesses and transaction costs on business combinations 24.9 6.5 Net property revaluation losses (111.1) (23.8) Realised and unrealised foreign exchange (losses)/gains (24.5) 19.4 Other Market Unit non-underlying items (8.8) (15.3) Early termination of secured loan notes - (112.3) Gains on return seeking assets, net of hedging 18.5 22.9 Central non-underlying items 0.2 (4.5) Total non-underlying items (185.0) (177.8) Statutory profit before tax 620.3 522.9 14
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