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May 29, 2023 230 likes •578 views

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

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SLIDE 1

Half year results presentation

6 months ended 30 June 2017

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SLIDE 2

Overview Financial review Outlook & operating priorities Market unit performance

Agenda

2017 half year results presentation 2

Market unit performance

Joy Linton, CFO Section 2

Financial review

Martin Potkins, Corporate Controller Gareth Evans, Group Treasurer Section 3 Evelyn Bourke, Group CEO

  • 1. Overview
  • 2. Market Unit performance
  • 3. Financial review
  • 4. Outlook and operating priorities
  • 5. Questions and Answers
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SLIDE 3

Overview Financial review Outlook & operating priorities Market unit performance

Section 1

Overview

Evelyn Bourke, Group CEO

3

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SLIDE 4

Overview Financial review Outlook & operating priorities Market unit performance

Embedding Bupa’s strategic framework

4 HY 2017 Group highlights

  • 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
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SLIDE 5

Overview Financial review Outlook & operating priorities Market unit performance

Investing in strength and depth for future growth

5 HY 2017 Group highlights

Bupa Arabia stake increased from 26.25% to 34.25%

Operating highlights:

Australian health insurance business remains No.1 provider in highly competitive market Affordability pressures for customers Intense competition Challenging and volatile political and economic environments

Operating environment characterised by:

In the UK, completed Oasis Dental Care acquisition; integration on track Bupa Thailand assets held for sale, with divestment announced on 25 July 2017. Growth in revenue, underlying profit and cashflow in H1 New CPO; Appointment of CEO International Markets announced.

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Overview Financial review Outlook & operating priorities Market unit performance

HY 2017 Group highlights

6

(1) The Solvency II capital coverage ratio is an estimated value.

Revenue

£6.1bn

+4% CER

Underlying profit before tax

£330.9m

+11% CER

Statutory profit before tax

£231.3m

+66% AER

Net cash flow from operations

£554.4m

+8% AER

Solvency coverage ratio (1)

160%

  • 44% pts
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SLIDE 7

Overview Financial review Outlook & operating priorities Market unit performance

Section 2

Market Unit performance

Joy Linton, Chief Financial Officer

7

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SLIDE 8

Overview Financial review Outlook & operating priorities Market unit performance

Australian health insurance drives growth, albeit in an increasingly testing market

8

Australia and New Zealand

Revenue Underlying profit Revenue by business

(HY 2016: £2,331.9m CER)

£2,439.3m

+5% CER +23% AER (HY 2016: £159.1m CER)

£163.1m

+3% CER +22% AER

Operating Environment

  • Continuing pressure on customer affordability in a highly

competitive health and care environment

  • Ongoing public policy initiatives impacting growth; Bupa in active

discussions with Government Performance

  • Revenue and profit growth for Bupa Health Insurance, despite

slower overall health insurance market growth

  • 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
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SLIDE 9

Overview Financial review Outlook & operating priorities Market unit performance

Good performance despite macro challenges

9

United Kingdom

Revenue Underlying profit Revenue by business

(HY 2016: £1,479.3m)

£1,369.6m

  • 7%

(HY 2016: £72.1m)

£84.6m

+17%

Operating Environment

  • IPT continues to impact affordability
  • Unpredictable political and economic environment; Brexit

causing uncertainty Performance

  • Revenue is down 7% reflecting the sale of Bupa Home

Healthcare (BHH), however up 11% when excluding the BHH sale to Celesio

  • 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

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SLIDE 10

Overview Financial review Outlook & operating priorities Market unit performance

Strong performance across all businesses, particularly insurance

10

Europe and Latin America

Revenue Underlying profit Revenue by business

(HY 2016: £1,306.1m CER)

£1,407.4m

+8% CER +22% AER (HY 2016: £71.9m CER)

£92.3m

+28% CER +45% AER

Operating Environment

  • Improved, stabilised political environment in Spain
  • Challenging market conditions in Chile and Poland

Performance

  • In Spain, Sanitas Seguros delivered good growth, driven by

partnerships and improvements to customer experience

  • Sanitas Hospitales enhanced digital capability through

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

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SLIDE 11

Overview Financial review Outlook & operating priorities Market unit performance

Growth in revenues but Bupa Global challenges continue to impact profitability

11

International Markets

Revenue(1) Underlying profit(1) Revenue by business(2)

(HY 2016: £751.4m CER)

£862.8m

+15% CER +27% AER (HY 2016: £34.4m CER)

£25.7m

  • 25% CER
  • 18% AER

Operating Environment

  • Less favourable economic conditions in Saudi Arabia
  • Intense competition for IPMI

Performance

  • Bupa Global customer mix changes and higher loss ratios
  • Increased stake in Bupa Arabia to 34.25%; continues to deliver

good customer and revenue growth

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

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Overview Financial review Outlook & operating priorities Market unit performance

Section 3

Financial review

Martin Potkins, Corporate Controller Gareth Evans, Group Treasurer

12

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Overview Financial review Outlook & operating priorities Market unit performance

Financial highlights

13 HY 2017 Financial overview

Short-term funding refinanced via £300m senior bond Completion of transactions impacts solvency and funding metrics at the half year as expected Solvency capital coverage 160% (1) Continued strong cash generation

(1) The Solvency II capital coverage ratio is an estimated value.

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Overview Financial review Outlook & operating priorities Market unit performance

Group grew revenues by 4% and underlying profit 11% – a good result given local market conditions

14 HY 2017 Financial overview

Revenues Underlying profit before tax(1)

HY 2017 HY 2016 (CER) £6.1bn £5.9bn

  • Deepened and strengthened our market positions

aided through a number of key transactions

  • Growth in underlying profit is underpinned by good

performances from ELA and the UK, driven by growth in Sanitas Seguros and the acquisition of Oasis Dental Care, respectively

HY 2017 HY 2016 (CER) £330.9m £298.5m

(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.

+4% at CER +15% at AER +11% at CER +26% at AER

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Overview Financial review Outlook & operating priorities Market unit performance

Statutory profit up 66%

15 Statutory profit

Revenues Statutory profit before tax

+4% at CER +15% at AER

HY 2017 HY 2016 (CER) £6.1bn £5.9bn

  • Reflects good trading performance in the first six

months of 2017. 2016 was negatively impacted by decision to redeem a securitisation

+66% at AER HY 2017 HY 2016 (AER) £139.6m

Underlying profit before tax

+11% at CER +26% at AER

HY 2017 HY 2016 (CER) £330.9m £298.5m

£231.3m

HY 2017 £m HY 2016 £m Underlying profit before tax 330.9 261.7 Amortisation of intangible assets arising on business combinations (32.7) (22.9) Net losses on disposal of businesses and transaction costs on business combinations (9.1) (2.6) Net property revaluation (losses)/gains (42.4) 3.6 Realised and unrealised foreign exchange losses (26.8) (1.0) Other Market Unit and central non-underlying items 0.5 (4.6) Early termination of secured loan notes

  • (112.3)

Gains on return seeking assets, net of hedging 10.9 17.7 Total non-underlying items (99.6) (122.1) Statutory profit before tax 231.3 139.6

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SLIDE 16

Overview Financial review Outlook & operating priorities Market unit performance

Acquisitions have reduced solvency coverage to 160% as expected

16 Solvency

Revenues Solvency II coverage ratio

+4% at CER +15% at AER

HY 2017 HY 2016 (CER) £6.1bn £5.9bn

  • 44% pts v FY16

HY 2017 (1) FY 2016 160% 204%

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

Underlying profit before tax HY 2017 HY 2016 (CER) £330.9m

£298.5m Statutory profit before tax

+66% at AER

HY 2017 HY 2016 (AER) £231.3m £139.6m Net cash generated from operating activities

+8% at AER

HY 2017 HY 2016 (AER) £554.4m £513.4m

HY 2016 180%

+11% at CER +26% at AER

HY 2017 FY 2016

HY 2016 180%

HY 2016

Own funds

£3.4bn

SCR

£1.9bn

Own funds Own funds Own funds

£3.4bn

SCR

£1.9bn HY 2017 (1) FY 2016 160% 204% HY 2016 180%

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SLIDE 17

Overview Financial review Outlook & operating priorities Market unit performance

Risk sensitivities

17 Solvency

(1) 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.

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Overview Financial review Outlook & operating priorities Market unit performance

Bridge from IFRS Net Assets to Solvency II Eligible Own Funds

18 Solvency

30 June 2017 IFRS to SII Eligible Own Funds (£m)

  • Goodwill & Intangibles are valued at nil for Solvency II purposes and therefore results in the biggest impact on own

funds

  • Participations include the removal of implied goodwill within IFRS associate investments as this is not recognised in the

SII fair value calculation

  • Total subordinated debt has remained unchanged since December 2016

6,802 2,423 3,378 241 13 1,310 4,266 367 341 14

1000 2000 3000 4000 5000 6000 7000 8000

IFRS Goodwill & Intangibles Technical Provisions Participations Other SII EBS Sub debt recognised as Capital Non-available Own Funds Non-controlling interest Net Assets Total SII Own Funds

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SLIDE 19

Overview Financial review Outlook & operating priorities Market unit performance

Movement in Solvency II capital surplus from 31 December 2016 to 30 June 2017

19 Solvency

Jun-18

(1) Note: Adjusted IFRS Net Assets include profit after tax of £169m adjusted to remove amortisation and impairment of goodwill and intangibles, deferred tax on intangible additions and other movements in reserves. (2) Note: “Other” includes movements in Technical Provisions, Foreign Exchange and Non-available funds

2,142 1,263 291 1,091 63 16

500 1000 1500 2000 2500 3000

Solvency surplus 31 December 2016 Adjusted IFRS Net Assets Acquisitions in the period SCR Other Solvency surplus 30 June 2017

(1) (2)

£m

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Overview Financial review Outlook & operating priorities Market unit performance

Breakdown of SCR

20 Solvency

(1) The Solvency II Capital Position is our current estimate. Own Funds have been recalculated based on actual YTD performance while SCR represents our latest estimate.

HY 2017 FY 2016 HY 2016 Insurance risk 19% 19% 23% Market risk 57% 60% 56% Spread risk 3% 2% 2% Equity risk 3% 2% 2% Property risk 34% 34% 32% Currency risk 11% 16% 12% Pension scheme 6% 6% 8% Counterparty risk 4% 4% 3% Operational risk 11% 11% 11% Participations (Associates and JVs) 8% 6% 7% Total 100% 100% 100%

  • There is no significant change to the profile of risk capital
  • Property risk remains Bupa’s single largest risk component which relates primarily to our care home portfolio in the UK,

Australia, New Zealand and Spain

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Overview Financial review Outlook & operating priorities Market unit performance

Cashflow remains strong

21 Cashflow

Revenues Net cash generated from operating activities

+4% at CER +15% at AER

HY 2017 HY 2016 (CER) £6.1bn £5.9bn

HY 2017 HY 2016 (AER) £554.4m £513.4m

Underlying profit before tax HY 2017 HY 2016 (CER) £330.9m

£298.5m

Statutory profit before tax

+66% at AER

HY 2017 HY 2016 (AER) £231.3m £139.6m

+8% at AER

+11% at CER +26% at AER

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Overview Financial review Outlook & operating priorities Market unit performance

Increased leverage following acquisitions

22 HY 2017 Financial overview

Revenues Leverage(1)

+4% at CER +15% at AER

HY 2017 HY 2016 (CER) £6.1bn £5.9bn

HY 2017 FY 2016 30.2% 22.6%

Underlying profit before tax

HY 2017 HY 2016 (CER) £330.9m £298.5m

Statutory profit before tax

+66% at AER

HY 2017 HY 2016 (AER) £231.3m £139.6m Net cash generated from operating activities

+8% at AER

HY 2017 HY 2016 (AER) £554.4m £513.4m Solvency II coverage ratio

  • 44% pts v FY16

HY 2017 FY 2016 160% 204%

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

+7.6% pts v FY16

HY 2016 24.3%

HY 2016 180%

+11% at CER +26% at AER

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Overview Financial review Outlook & operating priorities Market unit performance

H1 funding activity to support M&A

23 Funding

Leverage (1)

Jun-17 Jun-16 Dec-15 Jun-15 Jun-18 Dec-16

  • Leverage increased to 30.2% (FY16: 22.6%)
  • Good cash repatriations
  • £300m senior bond was issued in April to

refinance some short term acquisition financing

  • £395m drawn on the RCF at HY17
  • Stable Senior debt ratings A- (Fitch) and Baa1

(Moody’s)

(1) Gross debt (including hybrid debt) / gross debt plus equity (2) Amount reflects £6.4m of outstanding letters of credit on the RCF

Bank facility drawings (£m)

(2)

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Overview Financial review Outlook & operating priorities Market unit performance

Cash remains conservatively managed

24 Cash and Financial Investments

CASH AND INVESTMENT PORTFOLIO

  • £3.9bn cash and financial investments
  • Approximately 85% of portfolio held in investments rated

at least A-/A3

  • £400m return-seeking assets (externally-managed bond

and loan funds) held in UK and Australian regulated entities

  • Good returns in HY17 from bond and loan portfolio

£10.5m (HY16 £17.5m)

  • Low yield environment continues to provide a

challenging investment backdrop

HY17

Jun-18

HY17 CASH AND INVESTMENTS BY CREDIT RATING (%) FY 16

£3.9bn £3.6bn

Cash (e.g. deposits, liquidity funds) Return seeking assets

HY 16

£3.6bn

CASH AND INVESTMENTS BY LEGAL ENTITY (%)

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Overview Financial review Outlook & operating priorities Market unit performance

Section 4

Outlook and

  • perating

priorities

Evelyn Bourke, Group CEO

25

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Overview Financial review Outlook & operating priorities Market unit performance

Market conditions to remain testing in 2017; we are focused

  • n continuously improving the customer experience

Outlook and operating priorities

Outlook: Operating priorities:

  • Demand for high quality, value-for-money healthcare

expected to remain strong

  • Conditions in key markets expected to remain testing for

remainder of 2017

  • Continuing to navigate volatile political and economic

environments, including UK withdrawal from EU

  • Changing customer standards of personalisation, ease

and choice; high expectations of quality, safety, privacy and transparency

  • Continuously improving the customer experience
  • Empowering our people to deliver for our customers
  • Investing in the strength and depth of our market leading

businesses

  • Disciplined capital management
  • Focus on management of risk and compliance, upholding

the high standards our customers and regulators expect

26

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Overview Financial review Outlook & operating priorities Market unit performance

Questions and answers

27

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Overview Financial review Outlook & operating priorities Market unit performance

Further information

  • For further information or to request a follow-up call or meeting, email

ir@bupa.com

  • All financial results and 2016 SFCRs for Bupa Group and Bupa Insurance

Limited available on www.bupa.com/Corporate/our-performance

28

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Overview Financial review Outlook & operating priorities Market unit performance

Appendices

29

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Overview Financial review Outlook & operating priorities Market unit performance

Organisation structure

30 Market Units

Australia and New Zealand

  • Bupa Health Insurance
  • Bupa Health Services
  • Bupa Aged Care Australia
  • Bupa New Zealand

(1) Bupa completed the purchase of Oasis Dental Care on 09 February 2017 (2) Bupa Thailand sold 25 July 2017

Appendix UK Europe & Latin America International Markets

  • Bupa UK Insurance
  • Bupa Care Services
  • Bupa Health Services
  • Bupa Cromwell Hospital
  • Bupa Dental UK (1)
  • 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 China
  • Bupa Thailand (2)
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Overview Financial review Outlook & operating priorities Market unit performance

Bupa’s footprint and participation

31 Appendix

Hong Kong Thailand

(2)

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

(1) Bupa Arabia in Saudi Arabia and Max Bupa in India are associate businesses (2) Bupa Thailand sold July 2017 (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 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) (3) (4) (5) (6)

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Overview Financial review Outlook & operating priorities Market unit performance

Breakdown of borrowings

32

HY 2017 £m FY 2016 £m HY 2016 £m Borrowings under £800m bank facility 395

  • 90

Acquisition facility 353

  • £350m senior bond due 2016
  • 363

£330m perpetual hybrid bond (g’teed by Bupa Insurance Ltd) 389 387 407 £350m senior bond due 2021 348 348 348 £500m subordinated bond due 2023 501 501 500 £300m senior bond due 2024 295

  • £400m subordinated bond due 2026

395 395

  • Bupa Chile borrowings

185 207 197 Other 87 83 83 Total borrowings 2,948 1,921 1,988

Appendix

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Overview Financial review Outlook & operating priorities Market unit performance

Cautionary statement concerning forward-looking statements

33

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 on Bupa’s current beliefs and expectations about future events. These circumstances include, 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

  • f 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 statements. Other than as required by law, Bupa expressly disclaims any obligations or undertakings to release publicly any updates or revisions to any forward-looking statements to reflect any change in the expectations of Bupa with regard thereto or any change in events, conditions or circumstances on which any such statement is based. The information contained in this presentation is intended to be read in conjunction with, and not as a substitute for, Bupa’s half year statement for the six months ended 30 June 2017 (the “HY17 Report”). In the event of any inconsistency, the HY17 Report should be considered to prevail.

Disclaimer