presentation 12 months ended 31 December 2017 1 Agenda FY 2017 - - PowerPoint PPT Presentation
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
1
Section 1
Overview
Section 2
Market Unit performance
Section 3
Financial Review
Section 4
Outlook and
Section 5
Questions and answers
Evelyn Bourke Group CEO Martin Potkins Corporate Controller Gareth Evans Group Treasurer Joy Linton CFO
Agenda
FY 2017 results presentation
2
Overview Financial review Outlook & operating priorities Market unit performance
3
Evelyn Bourke Group CEO 3
Overview Financial review Outlook & operating priorities Market unit performance
Overview
4
FY 2017 Group highlights
Revenue
+5% CER
Underlying profit before tax
+10% CER
Net cash generated from operating activities
+4% AER
Solvency coverage ratio(1)
+20% pts vs HY 2017
Employee Net Promoter Score (eNPS)
+8pts
Customers
Insurance Provision Aged care
Overview
5
(1) The 2017 Solvency II capital position, SCR and coverage ratio are estimates
Overview Financial review Outlook & operating priorities Market unit performance
Joy Linton CFO 6
Overview Financial review Outlook & operating priorities Market unit performance
Solid growth in both revenue and profit despite challenging ongoing economic conditions
Revenue
(FY 2016: £4,730.0m CER)
+4% CER +13% AER
Underlying profit
(FY 2016: £375.1m CER)
+3% CER +12% AER
Operating environment − Continuing pressure on domestic PMI affordability; first reduction in 13 years in Australians with hospital cover − Continued work with the Australian Government to support broader health reform to improve affordability Performance − Revenue and profit growth for Bupa Health Insurance, despite slower
− Growth in health services business, driven by dental and Bupa Medical Visa Services, with partnership extended by two years − Australian aged care business negatively impacted by Government’s reduced sector funding − Aged care business in New Zealand continues to deliver revenue growth Customers
Insurance
Provision
Aged care
Revenue by business
Market Unit performance
7
Overview Financial review Outlook & operating priorities Market unit performance
Delivered good performance; health insurance and acquisition of Oasis Dental Care were key
Operating environment − Government increased Insurance Premium Tax to 12%, affecting affordability for insurance customers − Aged care remains under pressure in the public sector − Uncertainty remains around the full implications of Brexit Performance − Acquisition of Oasis Dental Care; strengthening market position with over two million dental patients − Health insurance performance strong; enhanced care pathways and better healthcare cost management improving customer experience and claims performance − Significantly reshaped our aged care business; selling a number of homes while investing in the quality of our retained care home and village portfolio
(FY 2016: £2,785.9m CER)
+1% CER
Underlying profit
(FY 2016: £194.9m CER)
+19% CER Insurance
Provision
Aged care
Market Unit performance
8
Revenue Customers Revenue by business
Overview Financial review Outlook & operating priorities Market unit performance
Good revenue and profit growth, as we continue to use technology to improve our service to customers
Operating environment − Spanish politics stable; though political situation in Catalonia is uncertain − Polish regulatory changes may affect access to publically funded healthcare − In Chile, economy is recovering; recent presidential elections expected to increase consumption Performance − Sanitas Seguros delivered good growth; driven by partnerships and improvements to customer experience − Sanitas Dental experienced excellent profit growth; better contribution from both dental centres and dental insurance − Sanitas Mayores acquired five care homes and opened a new one in Barcelona; total of 46 care homes in Spain − 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
(FY 2016: £2,679.6m CER)
Underlying profit
(FY 2016: £179.4m CER)
Insurance
Provision
Aged care
+7% CER +16% AER +10% CER +19% AER
Market Unit performance
9
Revenue Customers Revenue by business
Overview Financial review Outlook & operating priorities Market unit performance
While revenue grew in 2017, underlying profit declined due to Bupa Global
Operating environment − IPMI market remains competitive − Challenging operating environment in Saudi Arabia; increasing regulation and competition − Economic outlook in Hong Kong remains stable; competition is strong − In India, the health insurance sector continues to grow; penetration and healthcare expenditure remain low Performance − Ongoing transition in Bupa Global led to customer mix changes and higher loss ratios − Acquisition of Care Plus in Brazil in late 2016; integration on track − Increased stake in Bupa Arabia to 34.25%; and sold our business in Thailand − In Hong Kong, profit in health insurance business was strong and Quality HealthCare clinics continued expansion − In India, Max Bupa, our associate insurance business, delivered very strong customer and revenue growth
(FY 2016: £1,487.1m CER)
Underlying profit(1)
(FY 2016: £69.2m CER)
Insurance
Provision
+11% CER +15% AER
Market Unit performance
10
Revenue Customers Revenue by business(2)
BUPA ARABIA 21% BUPA HONG KONG 17% BUPA THAILAND 2% MAX BUPA (INDIA) 1% BUPA GLOBAL 59% (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 (2) 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
Martin Potkins Corporate Controller Gareth Evans Group Treasurer 11
Overview Financial review Outlook & operating priorities Market unit performance (1) The 2017 Solvency II capital position, SCR and coverage ratio are estimates
Solvency capital coverage 180%(1) Leverage down since June following disposals Continued good cash generation and re-investment in the business
Financial Review
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FY 2017 Financial overview
Underlying profit before tax(1) − Revenue increased by 5% with solid growth in all Market Units − Health insurance remains around 70%
− Underlying profit growth in our largest Market Units – Australia and New Zealand, the UK, and Europe and Latin America
+5% at CER +11% at AER +10% at CER +15% at AER Revenues
FY 2017 FY 2016 (CER) £12.2bn £11.7bn
FY 2017 Financial overview
FY 2017 £805.3m FY 2016 (CER) £732.7m
Financial Review
13
(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, restructuring costs and other one-off items
FY 2017 93% FY 2016 93%
Combined operating ratios
Insurance regulated entities
Bupa HI Pty Ltd (Australia) Bupa Insurance Ltd (UK) Sanitas S.A. de Seguros (Spain)
FY 2017 92% FY 2016 92% FY 2017 94% FY 2016 95% FY 2017 88% FY 2016 89%
Group
Statutory profit
Statutory profit before tax
− Reflects good trading performance in our largest Market Units in 2017 − Revaluation loss in UK Care Services business in 2017. 2016 was negatively impacted by decision to redeem a securitisation
+19% at AER
FY 2017 £m FY 2016 (AER) £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
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
FY 2017 FY 2016 (AER) £620.3m £522.9m
Financial Review
14
FY 2016 (CER) £11.7bn FY 2017 FY 2016 (CER) £805.3m £700.7m
Revenues
FY 2017 FY 2016 (CER) £12.2bn £11.7bn
Underlying profit before tax
FY 2017 FY 2016 (CER) £805.3m £732.7m FY 2017 FY 2016 (CER) £12.2bn £11.7bn FY 2017 FY 2016 (CER) £12.2bn £11.7bn FY 2017 FY 2016 (CER) £805.3m £732.7m
SCR
£3.7bn £2.1bn
Own funds Solvency II coverage ratio
Statutory profit before tax
FY 2017 £620.3m £522.9m FY 2017 HY 2017 FY 2016
Own funds
SCR
£3.4bn £2.1bn
Own funds Own funds
£4.2bn
SCR
£2.1bn FY 2017 HY 2017 180% 160%
FY 2016 (CER) £11.7bn FY 2017 FY 2016 (CER) £805.3m £700.7m
Revenues
FY 2017 FY 2016 (CER) £12.2bn £11.7bn
Underlying profit before tax
FY 2017 FY 2016 (CER) £805.3m £732.7m
Solvency(1)
204% FY 2016
Financial Review FY 2016 (AER) FY 2017
FY 2016 (CER) £12.2bn £11.7bn
15
(1) The 2017 Solvency II capital position, SCR and coverage ratio are estimates
FY 2017 FY 2016 (CER) £12.2bn £11.7bn FY 2017 FY 2016 (CER) £805.3m £732.7m FY 2017 £620.3m £522.9m FY 2016 (AER)
Overview Financial review Outlook & operating priorities Market unit performance
Financial Review
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180% 179% 178% 180% 169% 177% 179% 178% 172%
Solvency Coverage Ratio Interest rate + / - 100bps Credit spreads + 100bps assuming no credit transition Equity markets - 20% Property values - 10% GBP appreciates by 10% Pension risk +10% USP + 0.2% Loss Ratio worsening by 2%
(1) The 2017 Solvency II capital position, SCR and coverage ratio are estimates (2) Note: while this table only shows the impact of individual stresses, it is a helpful illustration of the relatively low risk inherent in our capital base
Solvency(1)
Overview Financial review Outlook & operating priorities Market unit performance
− Goodwill and intangibles have zero value under Solvency II − Technical provisions include best estimate plus a risk margin − Implied goodwill within associate investments has zero value under Solvency II − Subordinated debt is treated as capital under Solvency II but as a liability under IFRS − Pension surplus in excess of the Group SCR attributable to pension risk is excluded from Own Funds
Financial Review
17 7,290 2,880 3,730 240 1,300 4,290 350 10 440 10 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
IFRS Goodwill & Intangibles Technical Provisions Participations Other SII EBS Subordinated Debt Recognised As Capital Non-available Own Funds Non-controlling Interest Net Assets Total SII Own Funds
£m
(1) The 2017 Solvency II capital position, SCR and coverage ratio are estimates
Solvency(1)
Overview Financial review Outlook & operating priorities Market unit performance
Jun-18
2,140 1,650 640 180 960 160 110 60 20 500 1,000 1,500 2,000 2,500 3,000 3,500 Solvency Surplus FY 2016 Adjusted Profit Property Revaluations M&A Activity Bupa Arabia Investment IT Spend Other SCR Solvency Surplus FY 2017
(2) (3)
£m Financial Review
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(1) The 2017 Solvency II capital position, SCR and coverage ratio are estimates (2) Adjusted movement in IFRS reserves include profit after tax of £478m adjusted to remove amortisation and impairment of goodwill and intangibles (3) “Other” includes methodological changes, movements in Solvency II Technical Provisions and Solvency II tax positions
Solvency(1)
Overview Financial review Outlook & operating priorities Market unit performance
− There is no significant change to the profile of regulatory capital requirement − Property risk remains Bupa’s single largest component which relates primarily to our care home portfolio in the UK, Australia, New Zealand and Spain
Financial Review
19
FY 2017 HY 2017 FY 2016 Market risk 57% 57% 60% Pension scheme 6% 6% 6% Spread risk 3% 3% 3% Property risk 33% 34% 34% Equity risk 2% 3% 2% Currency risk 13% 11% 15% Counterparty risk 5% 4% 4% Insurance risk 18% 19% 19% Operational risk 12% 12% 11% Participations (Associates) 8% 8% 6% Total 100% 100% 100%
(1) The 2017 Solvency II capital position, SCR and coverage ratio are estimates
Solvency(1)
Overview Financial review Outlook & operating priorities Market unit performance
Net cash generated from operating activities
FY 2017 FY 2016 (AER) £929.4m £891.0m
+4% at AER
Financial Review
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Cash flow
Statutory profit before tax Revenues FY 2017 FY 2016 (CER) £12.2bn £11.7bn Underlying profit before tax FY 2017 FY 2016 (CER) £805.3m £732.7m FY 2017 £620.3m £522.9m FY 2016 (AER) Solvency II coverage ratio FY 2017 HY 2017 180% 160% FY 2016 204%
Overview Financial review Outlook & operating priorities Market unit performance
Leverage (1) 27.7% 24.3% 22.6% 30.2% 25.3% FY 2016 HY 2016 FY 2015 HY 2017
− Leverage reduced to 25.3% (HY 2017: 30.2%) − £800m revolving credit facility extended to 2022 − Stable senior debt ratings A- (Fitch) and Baa1 (Moody’s)
FY 2017
Financial Review
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(1) Gross debt (including hybrid debt) / gross debt plus equity
Funding
Overview Financial review Outlook & operating priorities Market unit performance
(6) (650) (49) (211) (226) 297 415 325 (55) (195) (111) (84) FY 2016 Oasis Acquisition Bond Proceeds Insurance Repatriations: UK, Spain and Australia Refinancing Debt in Subsidiary Bupa Arabia Investment Disposal Proceeds Central Costs Other FY 2017 Acquisition Facility Drawing £800m RCF Drawing
Bank facility drawings (£m)
(1)
Financial Review
22
(1) Amount reflects £6m of outstanding letters of credit on the RCF
Funding
Overview Financial review Outlook & operating priorities Market unit performance
Cash and investment portfolio
− £3.8bn cash and financial investments − Approximately 85% of portfolio held in investments rated at least A-/A3 − £404m return-seeking assets (externally-managed bond and loan funds) held in UK and Australian regulated entities − Good returns in FY 2017 from bond and loan portfolio £18.5m (FY 2016 £22.9m) − Low yield environment continues to provide a challenging investment backdrop
FY 2017 FY 2017 Cash and investments by credit rating (%) HY 2017
£3.8bn £3.9bn
Cash and cash-like instruments (e.g. deposits, liquidity funds, covered bonds) Return seeking assets
FY 2016
£3.6bn
Financial Review
23
Cash and Financial Investments
Evelyn Bourke Group CEO 24
Overview Financial review Outlook & operating priorities Market unit performance
Outlook
services
businesses
for our customers
markets
testing
continue to be high on our agenda
Operating priorities
Outlook and operating priorities
25
Outlook and operating priorities
26
Overview Financial review Outlook & operating priorities Market unit performance
For further information email ir@bupa.com
Info Results
All financial results and Solvency and Financial Condition Reports for Bupa Group and Bupa Insurance Limited available on www.bupa.com/Corporate/
1-2-1
We are planning 1-2-1 meetings with interested investors during the week commencing 12 March. Please email ir@bupa.com for further information
Appendix
27
Appendix
28
Australia and New Zealand − Bupa Health Insurance − Bupa Health Services − Bupa Villages and Aged Care Australia and New Zealand UK − Bupa UK Insurance − Bupa Dental Care − Bupa Care Services − Bupa Health Services Europe & Latin America − Sanitas Seguros − Sanitas Hospitales and New Services − Sanitas Dental − Sanitas Mayores − LUX MED (Poland) − Bupa Chile International Markets(1) − Bupa Global − Bupa Arabia − Bupa Hong Kong − Max Bupa (India) − Bupa China
(1) Bupa Thailand sold July 2017
Overview Financial review Outlook & operating priorities Market unit performance
Funding
Private medical insurance Pay-as-you-go Dental insurance Travel insurance Clinics Hospitals Dental clinics Optical and audiology
Healthcare provision
Care homes Retirement villages
Aged care provision
Poland
International Markets
UK
UK
Spain
Europe and Latin America
Australia New Zealand
Australia and New Zealand
Bupa Global China Saudi Arabia India Hong Kong
(2) (1) (2) (3) (4) (5)
Chile
Appendix
29
(1) Bupa Thailand sold July 2017 (2) Bupa Arabia in Saudi Arabia and Max Bupa in India are associate businesses (3) Global international insurance available in most countries. Includes 49% stake in Highway to Health (GeoBlue) in the US (4) Domestic insurance and clinics in Brazil (5) In addition to care homes, New Zealand also has brain rehabilitation and home alarm businesses
Overview Financial review Outlook & operating priorities Market unit performance
FY 2017 £m HY 2017 £m FY 2016 £m Borrowings under £800m bank facility(1) 220 395
49 353
371 389 387 £350m senior bond due 2021 349 348 348 £500m subordinated bond due 2023 501 501 501 £300m senior bond due 2024 296 295
395 395 395 Bupa Chile borrowings 205 185 207 Other 87 87 83 Total borrowings 2,473 2,948 1,921
Appendix
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(1) Excludes £6m of outstanding letters of credit
Overview Financial review Outlook & operating priorities Market unit performance
This document may contain certain “forward-looking statements”. Statements that are not historical facts, including statements about the beliefs and expectations of the British United Provident Association Limited Group (“Bupa”) and Bupa’s directors or management, are forward-looking statements. In particular, but not exclusively, these may relate to Bupa’s plans, 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 events and depend upon future circumstances that may or may not occur, many of which are beyond Bupa’s control and all of which are solely based
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. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual future condition, results, performance or achievements of Bupa or its industry to be materially different to those expressed or implied by such forward looking
updates or revisions to any forward-looking statements to reflect any change in the expectations of Bupa with regard thereto
The information contained in this presentation is intended to be read in conjunction with, and not as a substitute for, Bupa’s full year statement for the 12 months ended 31 December 2017 (the “FY17 Report”). In the event of any inconsistency, the FY17 Report should be considered to prevail.
Appendix
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