Half year results presentation 6 months ended 30 June 2016 4 - - PowerPoint PPT Presentation

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Half year results presentation 6 months ended 30 June 2016 4 - - PowerPoint PPT Presentation

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Half year results presentation 6 months ended 30 June 2016 4 August 2016 1 OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES 2016 HALF YEAR RESULTS PRESENTATION Agenda SECTION 1 SECTION 2 SECTION 3 Overview Financial

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SLIDE 1

Half year results presentation

6 months ended 30 June 2016

4 August 2016

1

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SLIDE 2

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

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SLIDE 3

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

3

SECTION 1

Overview

Evelyn Bourke CEO

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SLIDE 4

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

Our refreshed strategy

4

  • 1. Customers front

and centre

  • 2. Our people critical

to delivering great customer experiences and

  • utcomes
  • 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
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SLIDE 5

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

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

  • f 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

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SLIDE 6

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

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

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SLIDE 7

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

Revenue and profit growth driven by health insurance

7

UNITED KINGDOM

Revenues Underlying profit Revenues by business 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%

Operating Environment

  • 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
  • n 1 July 2016
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SLIDE 8

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

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

8

SPAIN AND LATIN AMERICA

Revenues Underlying profit Revenues by business 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%

Operating Environment

  • 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

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SLIDE 9

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

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%

Operating Environment

  • 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

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SLIDE 10

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

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

Operating Environment

  • 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 North America) (2) Chart includes 100% of Bupa revenues from all businesses to give a sense of scale

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SLIDE 11

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

11

SECTION 2

Financial review

Joy Linton CFO Gareth Evans Group Treasurer

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SLIDE 12

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

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 up 3% at AER

HY 2016 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.
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SLIDE 13

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

Statutory profit impacted by one-off securitisation redemption charge

13

HY 2016 FINANCIAL OVERVIEW

Revenue Statutory profit before tax

up 7% at CER up 8% at AER

HY 2016 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 up 3% at AER

HY 2016 HY 2015 (CER) £261.7m £256.8m

£139.6m

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SLIDE 14

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

Cash generation up 13%

14

HY 2016 FINANCIAL OVERVIEW

Revenue Net cash generated from operating activities

up 7% at CER up 8% at AER

HY 2016 HY 2015 (AER) £5.3bn £5.0bn

  • Continued focus on cash generation
  • Good profitability and favourable working

capital movements supported growth

up 13% at AER

HY 2016 HY 2015 (AER) £513.4m £453.7m

Underlying profit before tax

up 2% at CER up 3% at AER

HY 2016 HY 2015 (AER) £261.7m £256.8m

Statutory profit before tax

down 45% at AER

HY 2016 HY 2015 (AER) £139.6m £255.4m

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OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

Well capitalised under Solvency II

15

HY 2016 FINANCIAL OVERVIEW

Revenue Solvency II coverage ratio

up 7% at CER up 8% at AER

HY 2016 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

Underlying profit before tax

up 2% at CER up 3% at AER

HY 2016 HY 2015 (CER) £261.7m £256.8m

Statutory profit before tax

down 45% at AER

HY 2016 HY 2015 (AER) £139.6m £255.4m

Net cash generated from operating activities

up 13% at AER

HY 2016 HY 2015 (AER) £513.4m £453.7m

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SLIDE 16

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

Bupa well capitalised with low market risk volatility

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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%

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%

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OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

Leverage ratio reduced

17

HY 2016 FINANCIAL OVERVIEW

Revenue Leverage(1)

up 7% at CER up 8% at AER

HY 2016 HY 2015 (CER) £5.3bn £5.0bn

HY 2016 FY 2015 24.3% 27.7%

Underlying profit before tax

up 2% at CER up 3% at AER

HY 2016 HY 2015 (CER) £261.7m £256.8m

Statutory profit before tax

down 45% at AER

HY 2016 HY 2015 (AER) £139.6m £255.4m

Net cash generated from operating activities

up 13% at AER

HY 2016 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

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SLIDE 18

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

Reduction in leverage & simplification of borrowings

18

HY 2016 FINANCIAL OVERVIEW

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

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

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SLIDE 19

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

Investment portfolio remains conservative

19

HY 2016 FINANCIAL OVERVIEW

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

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OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

20

SECTION 3

Outlook & Operating Priorities

Evelyn Bourke CEO

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SLIDE 21

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

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

  • ur 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

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OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

22

2016 HALF YEAR RESULTS PRESENTATION

Questions & Answers

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SLIDE 23

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

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2016 HALF YEAR RESULTS PRESENTATION

Appendices

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SLIDE 24

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

Detailed organisation structure

24

MARKET UNITS AUSTRALIA AND NEW ZEALAND

  • 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:

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SLIDE 25

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

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 AUSTRALIA AND 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

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SLIDE 26

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

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:

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SLIDE 27

OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

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:

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OVERVIEW FINANCIAL REVIEW OUTLOOK & OPERATING PRIORITIES

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