half year results presentation - bupa · 2016 half year results presentation section 1 overview...

Half year results

presentation 6 months ended 30 June 2016

4 August 2016

1

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

Agenda

2

2016 HALF YEAR RESULTS PRESENTATION

SECTION 1

Overview

Evelyn Bourke CEO

SECTION 2

Financial

review

Joy Linton CFO

Gareth Evans Group Treasurer

SECTION 3

Outlook &

Operating

Priorities

Evelyn Bourke CEO


3

SECTION 1

Overview

Evelyn Bourke CEO


Our refreshed strategy

4

1. Customers front and centre

2. Our people critical to delivering great customer experiences and outcomes

3. Continuous change and digital

transformation

Deliver strong and sustainable growth through:

Remain focused on efficiency and compliance, with highly disciplined capital management

• Strengthening our businesses in current geographies

• Selective expansion in Asia and Latin America

• Leveraging our partnerships to grow and innovate


Modest growth in challenging market conditions

5

HY 2016 GROUP HIGHLIGHTS

Customer spending under pressure

Medical and cost inflation

Uncertain political and economic backdrop

Operating environment characterised by: Revenue

Underlying profit before tax(2)

Statutory profit before tax

Net cash flow from operations

Customers(4)

£5.3bn

£261.7m

£139.6m

£513.4m

28.2m

up 7% CER(1)

up 2% CER

down 45% AER(3)

up 13% AER

up 11% (1) Constant exchange rates (2) Underlying profit is defined as profit before taxation adjusted to remove amortisation and impairment

of intangible assets arising on business combinations, impairment of goodwill, 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, restructuring costs, transaction costs on acquisitions and disposals and one-off non trading items.

(3) Actual exchange rates (4) Total customers served in the six months to 30 June 2016


Good revenue growth across all business lines in a challenging and competitive environment

6

AUSTRALIA AND NEW ZEALAND

Revenues

Underlying profit

Revenues by business

Customers

(HY 2015: £1,845.3m CER)

£1,989.3m up 8% CER

up 7% AER

(HY 2015: £121.4m CER)

£133.4m up 10% CER

up 9% AER

(HY 2015: 5.1m)

5.3m up 4%

Operating Environment

• Ongoing consumer affordability pressures resulting from

rising costs and increasing demand

• Economic uncertainty in Australia coupled with shifting

political backdrop

Performance

• Revenue growth driven by robust performance of Health

Insurance business

• Performance driven by higher customer numbers, higher

premiums and a stable loss ratio

• Steady expansion of aged care business; opening five

new care homes in the region

• Good profit growth in Health Services, particularly in

branded dental centres


Revenue and profit growth driven by health insurance

7

UNITED KINGDOM

Revenues

Underlying profit


Customers

(HY 2015: £1,375.0m)

£1,479.1m up 8%

(HY 2015: £55.4m)

£72.1m up 30%

(HY 2015: 3.6m)

4.8m up 33%


• Limited immediate impact following EU Referendum

• Increase in Insurance Premium Tax continues to penalise

customers

• Active negotiations with local authorities to ensure their

fees reflect the true cost of care

Performance

• Revenue up 8% driven by growth in health insurance

business with higher earned premiums and strong retention

• Profit growth driven by health insurance with improved loss

ratios in Consumer and Corporate segments

• Positive acquisition contribution in Care Services and

Health Clinics

• Completed the sale of Bupa Home Healthcare to Celesio

on 1 July 2016


Good revenue and customer growth; underlying profit impacted by regulatory changes

8

SPAIN AND LATIN AMERICA

Revenues

Underlying profit


Customers

(HY 2015: £964.8m CER)

£1,034.9m up 7% CER

up 10% AER

(HY 2015: £60.7m CER)

£55.4m down 9% CER

down 4% AER

(HY 2015: 4.2m)

4.8m up 14%


• Persistent political uncertainty following recent Spanish election

• Free Choice Act legislation in Valencia continues

to negatively impact profitability

Performance

• Increased investment in customer acquisition

and retention

• Increased customer numbers and acquisitions of dental centres

driving strong revenue growth of 7%

• Decrease in underlying profit is driven mainly by regulatory

changes affecting Manises PPP hospital

• Record occupancy levels in aged care business,

up 2% to 95%

• Bupa Chile growth driven by higher premiums

in Isapre business

• 100% shareholding in Bupa Chile

*Our aged care business, previously known as Sanitas Residencial


Good revenue growth, although profit reduction primarily due to high claims in Thailand

9

INTERNATIONAL DEVELOPMENT MARKETS

Revenues (1)

Underlying profit

Revenues by business (2)

Customers

(HY 2015: £279.7m CER)

£312.4m up 12% CER

up 16% AER

(HY 2015: £10.5m CER)

£9.6m down 9% CER

down 5% AER

(HY 2015: 10.5m)

11.4m up 9%


• Oil price-driven macroeconomic slowdown in

Saudi Arabia

• Heavy flu season in Thailand resulting in high claims

Performance

• Maintained strong market positions in Poland and Hong

Kong, driving 12% increase in revenue

• Despite economic pressures, growth in customer numbers

has driven an increase in underlying profit in Bupa Arabia

• Underlying profit decline mostly driven by high claims in Bupa

Thailand

• Hong Kong businesses continue to perform well

• Increased walk-ins in Poland supported by new flagship clinic

in Warsaw

• Increased shareholding in associate company in India, Max

Bupa, to 49%

(1) Revenue of £312.4m does not include the revenues of our equity accounted associates (Max Bupa, India and Bupa Arabia) (2) Chart includes 100% of Bupa revenues from all businesses to give a sense of scale


Decline in profits following 2013 decision to exit non-strategic markets and investment in capability

10

BUPA GLOBAL

Revenues (1)

Underlying profit

Revenues by business (2)

Customers

(HY 2015: £499.9m CER)

£484.7m down 3% CER

up 1% AER

(HY 2015: £52.4m CER)

£30.1m down 43% CER

down 41% AER

(HY 2015: 1.9m)

1.9m flat


• Continued growth in demand for international private

medical insurance

• Some corporate clients have faced economic pressures,

particularly in the oil and gas sector, reducing the Corporate

and SME book

Performance

• Revenue down 3%, with strong new business performance

and contributions from new geographies offset by significant

lapses following exit from non-strategic markets

• Underlying profit down 43%, primarily due to investment in

capability and infrastructure

• Record new business performance in Corporate book

• Bancassurance partnership in Hong Kong, a key contributor

to new business growth

• Good performance in Highway to Health

(1) Revenue of £484.7m does not include the revenue of our equity accounted associate (Highway to Health, part of Bupa Global Nor th America) (2) Chart includes 100% of Bupa revenues from all businesses to give a sense of scale


11

SECTION 2

Financial review Joy Linton CFO

Gareth Evans Group Treasurer


Revenues up 7%, Underlying profit up 2%

12

HY 2016 FINANCIAL OVERVIEW

Revenue

Underlying profit before tax(1)

up 7% at CER

up 8% at AER HY 2016

HY 2015 (CER)

£5.3bn

£5.0bn

• Good revenue growth across all Market

Units with the exception of Bupa Global

• Modest profit growth in challenging conditions up 2% at CER


HY 2015 (CER)

£261.7m

£256.8m

(1) Underlying profit is defined as profit before taxation adjusted to remove amortisation and impairment of intangible assets arising on business combinations, impairment of goodwill, 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, restructuring costs, transaction costs on acquisitions and disposals and one-off non trading items.


Statutory profit impacted by one-off securitisation redemption charge

13


Revenue


up 7% at CER


HY 2015 (CER)

£5.3bn

£5.0bn

• £112.3m net expense on the redemption of

£235m secured loan notes

• Return-seeking asset gains of £17.7m driven

by corporate bond and emerging market debt

exposure

down 45% at AER HY 2016

HY 2015 (AER) £255.4m

Underlying profit before tax

up 2% at CER


HY 2015 (CER)

£261.7m

£256.8m

£139.6m


Cash generation up 13%

14


Revenue

Net cash generated from operating activities

up 7% at CER


HY 2015 (AER)

£5.3bn

£5.0bn

• Continued focus on cash generation

• Good profitability and favourable working

capital movements supported growth


HY 2015 (AER)

£513.4m

£453.7m


up 2% at CER


HY 2015 (AER)

£261.7m

£256.8m



HY 2015 (AER)

£139.6m

£255.4m


Well capitalised under Solvency II

15


Revenue

Solvency II coverage ratio

up 7% at CER


HY 2015 (CER)

£5.3bn

£5.0bn

up 2% pts HY 2016(1)

FY 2015

180%

178% (1) The Solvency II Capital Position (Own Funds and Solvency Capital Requirement) and related disclosures are estimated values


up 2% at CER


HY 2015 (CER)

£261.7m

£256.8m



HY 2015 (AER)

£139.6m

£255.4m



HY 2015 (AER)

£513.4m

£453.7m


Bupa well capitalised with low market risk volatility

16

SOLVENCY

SOLVENCY II COVERAGE RATIO

MARKET RISK SENSITIVITIES

• Solvency capital position remains strong

• Pension scheme surplus excluded from own

funds

• Low sensitivity to market risks

• Small, positive impact estimated as a result of

EU referendum decision

180%(1)

HY 2016

HY 2015 (AER)

180%

178%(2)

HY 2016

FY 2015

Own funds

£3.4bn

£1.9bn SCR

HY 2016

HY 2015 (AER)

180% Own funds

£3.1bn

£1.8bn SCR

coverage

coverage

(1) The Solvency II Capital Position (Own Funds and Solvency Capital Requirement) and related disclosures are estimated values

(2) The Solvency Coverage Ratio was updated to 178% from the 180% estimate disclosed in the 2015 Annual Report and Accounts

Solvency coverage ratio

Interest rate +/- 100bps

Credit spreads + 100bps assuming no credit transaction

SCR

SCR

SCR

SCR

SCR 178%

180%

179%

168%

180%

180%

180%

180%

0 50 100 150 200

Solvency Coverage Ratio

Interest rate +/- 100bps

Credit spreads + 100bps assuming no credit transaction

Equity markets - 20%

Property values – 10%

GBP appreciates by 10%

GBP depreciates by 10%

Pension risk +10%


Leverage ratio reduced

17


Revenue

Leverage (1)

up 7% at CER


HY 2015 (CER)

£5.3bn

£5.0bn

HY 2016

FY 2015

24.3%

27.7%


up 2% at CER


HY 2015 (CER)

£261.7m

£256.8m



HY 2015 (AER)

£139.6m

£255.4m



HY 2015 (AER)

£513.4m

£453.7m

Solvency II coverage ratio

up 2% pts HY 2016

FY 2015

180%

178%

(1) Gross debt (including hybrid debt) / gross debt plus equity

down 3.4% pts


Reduction in leverage & simplification of borrowings

18


LEVERAGE

31.5%

27.6%

28.0%

27.7%

24.3%

Equity markets -20%

Jun-16

Jun-15

Dec-14

Jun-14

Jun-18 DEBT MATURITY PROFILE AT 30 JUNE 2016

Dec-15

0

200

400

600

800

1000

2016 2017 2018 2019 2020 2021–25 > 2025

Bupa Finance plc Subordinated

Bupa Finance plc Senior

£800m BF plc f acility drawings

Other senior

Other Subordinated

• Leverage fell to 24.3% (FY:27.7%)

• £235m redemption reduces complexity and

future interest expense

• Good liquidity through £800m facility + new

£250m facility

• Bupa Finance plc rated A- (stable) with

Fitch and Baa2 (positive) with Moody’s


Investment portfolio remains conservative

19


CASH AND INVESTMENT PORTFOLIO • £3.6bn cash and financial investments

• Approximately 87% of portfolio held in

investments rated at least A-/A3

• £390m return-seeking assets (externally-

managed bond and loan funds) held in UK

and Australian regulated entities

• Positive impact on bond returns

immediately following EU referendum

decision

HY16

Jun-18 HY16 CASH AND INVESTMENTS BY CREDIT RATING (%)

FY 15

£3.6bn

£3.4bn

Cash (e.g. deposits, liquidity funds)

Return seeking assets


20

SECTION 3

Outlook & Operating Priorities Evelyn Bourke CEO


Looking forward, we expect challenging economic conditions to continue in our key markets, but anticipate modest growth for the rest of 2016

21

OUTLOOK & OPERATING PRIORITIES

We are focused on strengthening

our key market positions:

Customers front and centre

Our people critical to delivering great customer experiences and outcomes

Continuous change and digital capability

Efficiency and compliance


22


Questions

& Answers


23


Appendices


Detailed organisation structure

24

MARKET UNITS


• Bupa Australia

Health Insurance

• Bupa Health Services Australia

• Bupa Aged Care Australia

• Bupa Care Services

New Zealand

UNITED KINGDOM

SPAIN AND LATIN AM ERICA

INTERNATIONAL DEVELOPM ENT M ARKETS

BUPA GLOBAL

• Bupa Health

Funding

• Bupa Care Services UK

• Bupa Health Clinics

• Bupa Home Healthcare (1)

• Bupa Cromwell Hospital

• Sanitas Seguros

• Sanitas Hospitales

and New Services

• Sanitas Dental

• Sanitas Mayores

• Bupa Chile

• Bupa Arabia

• LUX MED

• Max Bupa

• Bupa Hong Kong

• Quality HealthCare

• Bupa Thailand

• Bupa Global

Rest of World

• Bupa Global Latin America

• Bupa Global North America

• Bupa Global

Middle East

• Bupa Global

Greater China

(1) The sale of Bupa Home Healthcare to Celesio completed on 1 July 2016

APPENDIX:


Bupa’s footprint and participation

25

Hong Kong

Thailand India Worldwide Saudi Arabia

Poland

INTERNATIONAL DEVELOPMENT MARKETS

BUPA GLOBAL

FUNDING

HEALTHCARE PROVISION

AGED CARE PROVISION

UK

UK

Spain

SPAIN AND LATIN AMERICA

Chile Australia New

Zealand


MARKET UNIT

COUNTRY

PMI

Medical Subscriptions

Travel

Dental

Health Coaching

Hospitals

Home Healthcare

Dental

Optical

Other Wellness

Brain Rehab

Care Homes

Medical Alarms

Care Villages

Clinics

APPENDIX:

CARE MANAGEMENT


Breakdown of borrowings

26

HY 2016 £m

FY 2015 £m

Borrowings under £800m bank facility 90 -

£500m subordinated bond due 2023 500 500

£330m perpetual hybrid bond (g’teed by Bupa Insurance Ltd) 407 387

£350m senior bond due 2016 363 363

£350m senior bond due 2021 348 348

£235m care homes securitisation due 2029 / 2031 - 238

Bupa Chile borrowings 197 153

Other 83 85

Total borrowings 1,988 2,074

APPENDIX:


Analysis of Bupa’s Solvency Capital Requirement

27

HY 2016

FY 2015

Insurance Risk 23% 19%

Market Risk 56% 61%

Spread Risk 2% 3%

Equity Risk 2% 1%

Property Risk 32% 31%

Currency Risk 12% 13%

Pension scheme 8% 13%

Counterparty Risk 3% 3%

Operational Risk 11% 11%

Participations (Associates and JVs) 7% 6%

Total 100% 100%

APPENDIX:


Cautionary statement concerning forward-looking statements

28

This document may contain certain forward-looking statements with respect to

certain of the British United Provident Association Limited Group’s (“Bupa’s”) plans and its current goals and expectations relating to future financial condition,

performance and results. By their nature forward-looking statements involve risk and uncertainty because

they relate to future events and circumstances which are beyond Bupa’s control, including, among others, global economic and business conditions, market

related risks such as fluctuations in interest rates and exchange rates, the policies and actions of governmental and regulatory authorities, the impact of

competition, the timing, impact and other uncertainties of future mergers or combinations within relevant industries. As a result, Bupa’s actual future

condition, performance and results may differ materially from the plans, goals and expectations set out in Bupa’s forward-looking statements. Bupa does not

undertake to update forward-looking statements contained in this document or any other forward-looking statement it may make.

DISCLAIMER

half year results presentation - bupa · 2016 half year results presentation section 1 overview...

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