Overview Financial review Outlook & operating priorities
Agenda
2016 full year results presentation
Section 1
Overview
Evelyn Bourke Group CEO
Financial review
Joy Linton CFO
Gareth Evans Group Treasurer
Outlook and operating priorities
Evelyn Bourke Group CEO
Section 2 Section 3
2
Overview Financial review Outlook & operating priorities
Section 1
Overview
Evelyn Bourke Group CEO
3
Overview Financial review Outlook & operating priorities
Funding and providing services to help people live longer, healthier, happier lives
Our business model
We fund Helping customers fund health and
care through domestic and international
health insurance, as well as other
funding models
We provide Providing health and care services
through primary care clinics, hospitals,
dental centres, and aged
care services
Our services
Underpinned by
Delivering for
Customers
Employees
Partners
Society
4
Overview Financial review Outlook & operating priorities
5
Investing in strength and depth
Winning locally, enabled globally
Ever-focused on quality, efficiency, safety and compliance. Disciplined in risk and capital management
Our strategy to drive the next phase
of Bupa’s growth in today’s digital age
Our refreshed Strategic Framework
Overview Financial review Outlook & operating priorities
Revenue and profit growth in challenging market conditions
6
FY 2016 Group highlights
Reshaped UK portfolio, exiting home healthcare and purchasing Oasis Dental Care (1)
Operating highlights:
Good profit growth in three largest Market Units
Reduced from five to four Market Units Appointments to executive team
Weaker macro backdrop and political change
Changing customer and regulatory expectations
Consumer and government affordability pressures
Operating environment characterised by:
(1) Sale of Bupa Home \Healthcare in July 2016. Purchase of Oasis Dental Care on 09 February 2017 subject to CMA approval
Australia's leading health insurer
Overview Financial review Outlook & operating priorities
FY 2016 Group highlights
7
(1) Underlying profit is up 2% at CER and up 12% at AER when excluding the impact of the IFRIC 12 adjustment relating to our Spanish Public-Private Partnerships (PPPs) in 2015.
(2) The Solvency II capital coverage ratio for 2016 is an estimated value. This is prior to the completion of the Oasis Dental Care purchase.
Revenue
£11.0bn +4% CER
Underlying profit before tax
£700.7m +10% CER
+2% CER(1)
Statutory profit before tax
£522.9m +40% AER
Net cash flow from operations
£891.0m +13% AER Employee Net Promotor Score (eNPS)
+30 Oct +9pts
Since July
Solvency coverage ratio (2)
204% +24% pts
Customers
Insurance +6% 16.5m
10.6m
33,100
+14%
+2%
Provision
Aged Care
Overview Financial review Outlook & operating priorities
Revenue up 7%; profit up 9%
8
Australia and New Zealand
Revenues
Underlying profit
Revenues by business
Customers
(FY 2015: £4,078.3m CER)
£4,360.6m +7% CER
+20% AER
(FY 2015: £314.7m CER)
£344.4m +9% CER
+23% AER
Insurance
Operating Environment
• Customer affordability remains an industry-wide challenge;
Bupa maintaining focus on service and value
• Continue to engage with Government regarding expected
adverse impact of reduced Aged Care Funding Instrument
Performance
• Resilient growth in Health Insurance business, becoming
Australia’s largest health insurer
• Health Services Australia business maintained strong market
position; Bupa is the country’s largest dental provider
• Bupa Aged Care Australia remains the country’s leading private
aged care provider, caring for nearly 7,000 residents
• Aged care business in New Zealand grew, with four new care
homes and three retirement villages
• Building new tools and capabilities for meaningful and
personalised customer interactions
Provision
Aged care
4.0m
1.9m
10,800
Overview Financial review Outlook & operating priorities
Revenue down 3% (up 5% like-for-like(1)); profit up 7%
9
United Kingdom
Revenues
Underlying profit
Revenues by business
Customers
(FY 2015: £2,857.8m)
£2,785.9m -3%
(FY 2015: £182.6m)
£194.9m +7%
Operating Environment
• Further increases to the Insurance Premium Tax (IPT).
Committed to making quality, value-for-money healthcare
more affordable and accessible
• Continue to negotiate with local authorities to cover the true
cost of care including impact of National Living Wage
• Limited impact from Brexit at this stage
Performance
• Decline in revenue of 3% due to sale of Bupa Home
Healthcare in July, up 5% when comparing like-for-like (1)
• Health insurance business performed well, with profit
driven by improved corporate and consumer loss ratios
• Digital transformation and innovation remains a priority
• Active management of our Care Services portfolio
• Significant re-shaping of UK portfolio with sale of Home
Healthcare and Oasis Dental Care purchase(2)
Insurance
Provision
Aged care
2.4m
1.2m
17,400
(1) When excluding Bupa Home Healthcare from 2015 and 2016.
(2) Bupa Home Healthcare sole July 2017. Purchase of Oasis Dental Care completed February 2017 subject to CMA approval.
Overview Financial review Outlook & operating priorities
Purchase of Oasis Dental Care
Rationale
• Dentistry is a strategic growth area for Bupa, as it enables us to build
relationships with a broader base of customers
• Unique opportunity to establish a national retail presence and cross-sell
Oasis overview
• Customer-centric model: accessible, transparent pricing, high quality care
• Strong customer satisfaction: Net Promoter Score 2x market average
• First dental chain to advertise nationally
Transaction summary
• Purchase announced on 18 November 2016
• Transaction completed 9 February 2017 with an enterprise value of £835m(2)
Solvency Impact
• Reduced our coverage ratio to an estimated 165%, comfortably within our
capital risk appetite
UK Dental market size
£7.1bn Total Bupa UK dental clinics post purchase
c.420 Dentists
1,800 Customers
2m
(1) Estimated figure
(2) Subject to CMA approval.
Pro forma Group Solvency ll coverage ratio(1)
165%
10
United Kingdom
Overview Financial review Outlook & operating priorities
Revenue up 10%; profit up 63% (up 10% like-for-like(1))
11
Europe and Latin America
Revenues
Underlying profit
Revenues by business
Customers
(FY 2015: £2,251.8m CER)
£2,474.7m +10% CER
+22% AER
(FY 2015: £101.8m CER)
£165.6m +63% CER
+84% AER
Operating Environment
• Challenging Spanish political environment; we remain
confident in our PPPs
• Mitigating the adverse impact of uncertainties relating to the
Chilean premium increase process on Isapre through tighter
cost management
Performance
• Revenue growth across a number of business units in Spain,
including continued growth in our Sanitas insurance business
• Achieved strong year-on-year revenue growth in Bupa Chile
driven in part by Isapre performance improvement
• Ongoing investment in full digital transformation delivering
improved customer journey
• Aged care business, Sanitas Mayores, delivering consistently
high occupancy rates
• Increased ownership of Bupa Chile from 73.7% to 100%
• LUX MED in Poland achieved significant revenue growth
Insurance
Provision
Aged care
2.9m
6.7m
4,900
(1) Under IFRIC 12, which applies to service concession contracts such as Public-Private Partnerships, we use the average operating
margin for the life of the contract (based on historic performance plus projections) as a means for recognising results. Once there is a
change in performance compared to expectations, the operating margin is reassessed and an adjustment made to the current year
results to bring the contract performance to date in line with the revised margin. In 2015, this negative non-cash adjustment of £52.0m
included an amount relating to the current year of £8.8m together with a retrospective adjustment for the years preceding 2015 of
£43.2m. To compare the result on a ‘like for like’ basis with 2016, we have excluded £48.6m (being £43.2m retranslated at 2016 rates)
from underlying profit in 2015.
Overview Financial review Outlook & operating priorities
Revenue up 1%; profit down 52% driven by Bupa Global
12
International Markets
Revenues(1)
Underlying profit
Revenues by business(2)
Customers
(FY 2015: £1,418.9m CER)
£1,427.8m +1% CER
+10% AER
(FY 2015: £138.1m CER)
£65.9m -52% CER
-48% AER
Operating Environment
• Operate in diverse markets with healthcare regulation and
economic environment constantly evolving
• Challenging market conditions in Saudi Arabia, including a
slowing economy
• Indian health insurance sector attracting new entrants and
highly competitive
Performance
• Decline in Bupa Global profit driven by the ongoing impact of
our 2013 decision to exit non-strategic markets, investment in
capability and infrastructure, and lower than anticipated rate
of growth in Individual and Small Medium Enterprise books
• Strengthened position in Hong Kong
• Strong customer and revenue growth in Bupa Arabia despite
challenging backdrop
• Increased shareholder in Max Bupa from 26% to 49% in June
• Acquired Care Plus in Brazil in December
(1) Revenue of £1,427.8m 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)
(2) Chart includes 100% of Bupa revenues from all businesses to give a sense of scale
Insurance
Provision
7.2m
0.7m
Overview Financial review Outlook & operating priorities
Section 2
Financial review
Joy Linton, CFO
Gareth Evans, Group Treasurer
13
Overview Financial review Outlook & operating priorities
Strong financial management discipline with focus on sustainable growth
FY 2016 Financial overview
Debt restructured
Financial highlights:
Strong cash generation
Robust capital base
Credit rating improved
14
Overview Financial review Outlook & operating priorities
Continued growth in revenue and underlying profit
15
FY 2016 Financial overview
Revenue
Underlying profit before tax(2)
FY 2016
FY 2015 (CER)
£11.0bn
£10.6bn
• Revenue increased by 4%, with good growth in
Australia and New Zealand, UK(1) and Europe and
Latin America
• Excluding the impact of the IFRIC 12 non-cash
adjustment relating to our Spanish PPPs in 2015(4),
underlying profit before taxation is up 2% at CER
and up 12% at AER
FY 2016
FY 2015 (CER)
£700.7m
£638.1m
(1) Like for like growth when adjusted for the disposal of Bupa Home Healthcare in July 2016.
(2) 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.
(3) Underlying profit is up 2% at CER and up 12% at AER when excluding the impact of the IFRIC 12 adjustment relating to our Spanish Public-Private Partnerships (PPPs) in 2015
(4) Under IFRIC 12, which applies to service concession contracts such as PPPs, we use the average operating margin for the life of the contract (based on historic performance plus projections) as a means for recognising
results. Once there is a change in performance compared to expectations, the operating margin is reassessed and an adjustment made to the current year results to bring the contract performance to date in line with the
revised margin. In 2015, this non-cash adjustment of £52m included an amount relating to the current year of £8.8m together with a retrospective adjustment for the years preceding 2015 of £43.2m. To compare the
result on a “like for like’ basis with 2016, we have excluded £48.6m (being £43.2m retranslated at 2016 rates) from underlying profit in 2015.
+4% at CER
+12% at AER
+10% at CER
+2%(3) at CER
+20% at AER
Overview Financial review Outlook & operating priorities
Statutory profit up 40%
16
FY 2016 Financial overview
Revenue
Statutory profit before tax
+4% at CER
+12% at AER FY 2016
FY 2015 (CER)
£11.0bn
£10.6bn
• No significant write downs in 2016 compared to
£181.9m in the UK Care Services business in 2015
• Net loss of £112.3m on the redemption of the
secured loan notes in April 2016
• Favourable FX movements
+40% at AER FY 2016
FY 2015 (AER) £374.3m
Underlying profit before tax
+10% at CER
+2% at CER FY 2016
FY 2015 (CER)
£700.7m
£638.1m
£522.9m
+20% at AER
Overview Financial review Outlook & operating priorities
Continued strong cash generation
17
FY 2016 Financial overview
Revenue
Net cash generated from operating activities
+4% at CER
+12% at AER FY 2016
FY 2015 (CER)
£11.0bn
£10.6bn
• Strong net cash generated from operating
activities with £102.9m increase
• Increase driven by growth in earnings, positive
working capital movements in ANZ and
favourable impact of FX
FY 2016
FY 2015 (AER)
£891.0m
£788.1m
Underlying profit before tax
FY 2016
FY 2015 (CER)
£700.7m
£638.1m
Statutory profit before tax
+40% at AER FY 2016
FY 2015 (AER)
£522.9m
£374.3m
+13% at AER
+10% at CER
+2% at CER
+20% at AER
Overview Financial review Outlook & operating priorities
High capital coverage pre-Oasis Dental Care completion
18
FY 2016 Financial overview
Revenue
Solvency II coverage ratio
+4% at CER
+12% at AER FY 2016
FY 2015 (CER)
£11.0bn
£10.6bn
+24% pts v HY16 FY 2016 (1)
HY 2016
204%
180%
(1) The Solvency II Capital Position (Own Funds and Solvency Capital
Requirement) and related disclosures are estimated values
(2) The 2015 Solvency coverage ratio was updated to 178% from the 180%
estimate disclosed in the 2015 Annual Report and Accounts.
Underlying profit before tax
FY 2016
FY 2015 (CER)
£700.7m
£638.1m
Statutory profit before tax
+40% at AER FY 2016
FY 2015 (AER)
£522.9m
£374.3m
Net cash generated from operating activities
+13% at AER FY 2016
FY 2015 (AER)
£891.0m
£788.1m
FY 2015 (2) 178%
+10% at CER
+2% at CER
+20% at AER
Overview Financial review Outlook & operating priorities
Estimated Solvency capital coverage ratio: 204%, pre-Oasis
19
Solvency
Solvency II coverage ratio
Risk sensitivities
204%(1) HY 2016
HY 2015 (AER)
180% FY 2016
HY 2016
Own funds £4.2bn
£2.1bn SCR
HY 2016 HY 2015 (AER)
180%
Own funds £3.4bn
SCR
coverage
(1) The Solvency II Capital Position (Own Funds and Solvency Capital
Requirement) and related disclosures are estimated values
Solvency coverage ratio
Interest rate +/- 100bps
Credit spreads + 100bps assuming no credit transaction
SCR
SCR
SCR
SCR
SCR 196%
201%
203%
201%
193%
204%
204%
204%
204%
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%
Pension risk +10%
USP + 0.2%
• As Bupa generates substantial profits
and cash surpluses, solvency
capital builds relatively quickly
• A £400m tier 2 subordinated bond
issued in December 2016 is a key
contributor to the 24% increase in
coverage
• Bupa’s Solvency II capital position is
relatively insensitive to market related
risks Loss ratio worsening by 2%
FY 2015
£1.9bn
Own funds £3.1bn
SCR £1.8bn
Overview Financial review Outlook & operating priorities
Leverage down following cash repatriations and favourable FX movements
20
FY 2016 Financial overview
Revenue
Leverage(1)
+4% at CER
+12% at AER FY 2016
FY 2015 (CER)
£11.0bn
£10.6bn
FY 2016
HY 2016
22.6%
24.3%
Underlying profit before tax
FY 2016
FY 2015 (CER)
£700.7m
£638.1m
Statutory profit before tax
+40% at AER FY 2016
FY 2015 (AER)
£522.9m
£374.3m
Net cash generated from operating activities
+13% at AER FY 2016
FY 2015 (AER)
£891.0m
£788.1m
Solvency II coverage ratio
+24% pts v HY16 FY 2016
HY 2016
204%
180%
(1) Gross debt (including hybrid debt) / gross debt plus equity
-1.7% pts v HY16
FY 2015 27.7%
FY 2015 178%
+10% at CER
+2% at CER
+20% at AER
Overview Financial review Outlook & operating priorities
A strong year for funding as leverage reduced and our senior debt rating improved
21
FY 2016 Financial overview
Leverage
27.6%
28.0%
27.7%
24.3%
22.6% Dec-16
Dec-15
Jun-15
Dec-14
Jun-18 Debt maturity profile at 31 December 2016
Jun-16
0
200
400
600
800
1000
1200
£m
Bupa Finance plc Tier 2 Subordinated
Bupa Finance plc Senior
Bupa Finance plc Tier 1 Subordinated perpetual guaranteed
Other Senior unsecured
Bank Loans
• Leverage fell to 22.6% (HY16: 24.3%)
• Good cash repatriations and favourable FX
• Senior debt ratings A- (Fitch) and Baa1
(Moody’s) following one notch Moody’s
upgrade in September
• Simpler debt structure following bond
maturity and securitisation redemption
• £650m acquisition facility signed January
2017 to part fund Oasis Dental Care
purchase
Other
Overview Financial review Outlook & operating priorities
Good bond returns; we continue to manage cash prudently
22
FY 2016 Financial overview
CASH AND INVESTMENT PORTFOLIO • £3.6bn cash and financial investments
• Approximately 86% of portfolio held in
investments rated at least A-/A3
• £367m return-seeking assets (externally-
managed bond and loan funds) held in UK
and Australian regulated entities
• Good returns in 2016 from bond and loan
portfolio £22.9m (2015 £7.0m)
• Low yield environment continues to provide
a challenging investment backdrop
FY16
Jun-18 FY16 CASH AND INVESTMENTS BY CREDIT RATING (%)
HY 16
£3.6bn
£3.6bn
Cash (e.g. deposits, liquidity funds)
Return seeking assets
FY 15 £3.4bn
Overview Financial review Outlook & operating priorities
Section 3
Outlook and operating priorities Evelyn Bourke, Group CEO
23
Overview Financial review Outlook & operating priorities
Market conditions remain challenging; focused on enhancing our services for customers in this digital age
Outlook and operating priorities
Outlook:
Operating priorities:
• Demand for high quality, value-for-money healthcare
expected to remain strong
• Consumer and government affordability pressures with
medical costs outpacing inflation
• Changing political environments, including UK preparing
to exit the EU
• Rapidly-changing customer standards of personalisation,
ease and choice; high expectations of quality, safety,
privacy and transparency
• High quality, value-for-money services in the digital age
• Empowering our people to deliver for our customers
• Focus on management of risk and compliance, upholding
the high standards our customers and regulators expect
• Disciplined capital management
• Investing in growth in our key existing markets; selective
expansion into new growth markets
Overview Financial review Outlook & operating priorities
Organisation structure
27
Market Units
Australia and New Zealand
• Bupa Health Insurance
• Bupa Health Services
• Bupa Aged Care Australia
• New Zealand Care Services
(1) The sale of Bupa Home Healthcare to Celesio completed on 1 July 2016
(2) Bupa completed the purchase of Oasis Dental Care on 09 February 2017
Appendix
UK (1) Europe & Latin America
International Markets
• Bupa UK Insurance
• Bupa Care Services
• Bupa Health Clinics
• Bupa Cromwell Hospital
• Oasis Dental Care (2)
• Sanitas Seguros
• Sanitas Hospitales and
New Services
• Sanitas Dental
• Sanitas Mayores
• LUX MED
• Bupa Chile
• Bupa Global
• Bupa Arabia
• Bupa Hong Kong
• Quality HealthCare
(Hong Kong)
• Max Bupa (India)
• Bupa Thailand
• Bupa China
Overview Financial review Outlook & operating priorities
Bupa’s footprint and participation
28
Appendix
Hong
Kong Thailand India (1)
Saudi
Arabia (1) Poland
International Markets
Funding
Healthcare
provision
UK
UK
Spain
Europe and Latin
America
Chile Australia New
Zealand
Australia and
New Zealand
Private medical insurance
Pay-as-you-go
Dental insurance
Clinics
Hospitals
Dental clinics
Bupa
Global
Optical
Travel insurance
Aged care
provision
Care homes
Retirement villages
4.0m 2.4m 2.9m 7.2m
(1) Bupa Arabia in Saudi Arabia and Max Bupa in India are associate businesses
(2) Global international insurance available in most countries. Includes 49% stake in Highway to Health (GeoBlue) in
the US
(3) Excludes Oasis Dental Care 2017
(4) Domestic insurance and clinics in Brazil
(5) In addition to Quality HealthCare Hong Kong, two clinics in development in Guangzhou, China
(6) Home healthcare rather than care homes
(7) In addition to care homes, New Zealand also has brain rehabilitation and home alarm businesses
(7)
1.9m 1.2m (3) 0.7m 6.7m
10,800 17,400 4,900
Funding customers
Provision customers
Aged care residents
(2)
(4) (5)
(6)
Overview Financial review Outlook & operating priorities
Breakdown of borrowings
29
FY 2016 £m
HY 2016 £m
FY 2015 £m
Borrowings under £800m bank facility 0 90 -
£500m subordinated bond due 2023 501 500 500
£330m perpetual hybrid bond (g’teed by Bupa Insurance Ltd) 387 407 387
£350m senior bond due 2016 - 363 363
£350m senior bond due 2021 348 348 348
£400m subordinated bond due 2026 395 - -
£235m care homes securitisation due 2029 / 2031 - - 238
Bupa Chile borrowings 207 197 153
Other 83 83 85
Total borrowings 1,921 1,988 2,074
Appendix
Overview Financial review Outlook & operating priorities
Analysis of Bupa’s Solvency Capital Requirement
30
FY 2016 HY 2016 FY 2015
Insurance risk 19% 23% 19%
Market risk 60% 56% 61%
Spread risk 2% 2% 3%
Equity risk 2% 2% 1%
Property risk 34% 32% 31%
Currency risk 16% 12% 13%
Pension scheme 6% 8% 13%
Counterparty risk 4% 3% 3%
Operational risk 11% 11% 11%
Participations (Associates and JVs) 6% 7% 6%
Total 100% 100% 100%
Appendix
Overview Financial review Outlook & operating priorities
Cautionary statement concerning forward-looking statements
31
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
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