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 Financial 4. Outlook and operating priorities performance review 5. Questions and Answers Martin Potkins, Corporate Controller Evelyn Bourke, Group CEO Joy Linton, CFO 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 Affordability pressures for customers No.1 provider in highly competitive market In the UK, completed Oasis Dental Care Intense competition acquisition; integration on track 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 +8% AER Revenue Net cash flow from operations +4% CER £554.4m £6.1bn Underlying profit before tax Solvency coverage ratio (1) +11% CER -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 Operating Environment Revenue +5% CER £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 discussions with Government Underlying profit +3% CER £163.1m +22% AER 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 Healthcare (BHH), however up 11% when excluding the BHH (HY 2016: £72.1m) 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 £92.3m +45% AER • 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 10
Overview 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) Performance Underlying profit (1) -25% CER • Bupa Global customer mix changes and higher loss ratios £25.7m -18% AER • 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. 11 (2) Chart includes 100% of Bupa revenues from all businesses to give a sense of scale
Overview Market unit performance Financial review Outlook & operating priorities Section 3 Financial review Martin Potkins, Corporate Controller Gareth Evans, Group Treasurer 12
Overview 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. 13
Overview 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 aided through a number of key transactions +15% at AER HY 2016 (CER) £5.9bn Underlying profit before tax (1) • Growth in underlying profit is underpinned by good +11% at CER 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. 14
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