results presentation full year 2020bupa full year results presentation 2020 section 1 section 2...

Full year results presentation 202031 December 2020

AgendaSection 1Overview

Section 2Market Unit performance

Section 3Financial Review

Section 4Outlook and operating priorities

Section 5Questions and answers

Bupa Full Year Results Presentation 2020

Martin PotkinsInterim Chief Financial Officer

Gareth Roberts Group Financial Controller

Gareth EvansGroup Treasurer

2

Section 1 Section 2 Section 3 Section 4 Section 5


Overview


3



Group highlights

The full year results reflectour financial resilience and the benefits of our diversified business, despite volatile trading conditions caused by COVID-19.

Revenue Solvency II capital coverage ratio1

Statutory profit/(loss) before taxation

Net cash generated from operating activities

Underlying profit before taxation Ratings

£12.1bn-2% AER0% CER

160%2019: 159%

£410m2019: £(78)m AER

£1.3bn2019: £0.7bn AER

£388m-7% AER-4% CER

A3Moody’s senior debt rating negative outlook2

BBB+Fitch senior debt rating stable3

1 The 2020 Solvency II capital position is an estimate, and it is unaudited.2 Moody’s placed on negative outlook on 9 April 2020.3 Fitch rating downgrade on 31 March 2020.

4



Our response to COVID-19

Throughout the pandemic our priorities have been to focus on the welfare of our customers and our people and to play our part in government and public health responses.

We invested to keep our customers and people safe and well, ensure operational resilience and to deliver new services in challenging operating environments.

We accelerated digital programmes so that our insurance and health provision customers could continue to access treatment and care.

In health provision, our hospitals and clinics in Spain, Chile, Hong Kong SAR, Poland and the UK worked in partnership with public health systems.

In health insurance, we undertook a range of targeted actions across our markets to support our customers and deliver value.

For our people, we expanded services such as 24/7 helplines, access to psychological supportand counselling and sessions to build resilience.

In aged care, protecting residents and staff remains our absolute focus. We put comprehensive safety measures in place and invested in safety equipment, training and support for our people.

5



Operational highlights

Other operational highlights

In August we increased ourshareholding in Bupa Arabiaby 4% to 43.25%.

We enhanced our liquidityand capital position through two bond issues together raising £650m. We redeemed £330m of bonds issued in 2004.

We strengthened our internal ESG governance, embedded a new emissions reporting tool and progressed the development of a new Environment and Climate Action Plan.

Our MSCI ESG ratingwas upgraded to ‘A’ in December 2020.

6



Principal drivers of underlying performance

1 Revenue from associate businesses are excluded from reported figures.2 Profit percentages are derived from reportable segments which excludes central expenses and net interest margin.

Revenue

£12.1bn-2% AER0% CER

Underlying profit before taxation

£388m-7% AER-4% CER

▪ Insurance profits increased. This was offset by losses in provision and aged care businesses due to lockdowns and additional costs from COVID-19.

▪ Increase in insurance profits was driven by the reduced levels of claims, as lockdown measures restricted access to private healthcare and postponed elective procedures.

▪ We are anticipating that claims will rebound in 2021 across our insurance businesses, although timing and quantification will vary by market.

▪ The volatility of claims rebound in 2021 is largely mitigated in Australia, where the prudential regulator requires all health insurers to hold an additional reserve for deferred claims.

▪ The results also include a return of premium provision in the UK for our pledge to pass back any exceptional financial benefit ultimately arising as a result of COVID-19 to UK PMI customers.

Market Unit performance as a percentage of total Group

Group Revenue1 Group Underlying Profit2

A

BC

DA. ELA 31%B. BGUK 26%C. Other

Businesses 4%D. ANZ 39%

A

B

C

DA. ELA 39%B. BGUK 24%C. Other

Businesses 13%D. ANZ 24%

7



Market Unit performance


8



Australia and New Zealand

1 Combined Operating Ratio is an alternative performance metric for insurance businesses. It is calculated based on incurred claims and operating expenses divided by net earned premiums.2 Bupa HI Pty Ltd (Australia): based on S.05.01 Prudential Regulation Authority (SII) form (estimated and unaudited)

A

B

C D

Results driven by a decline in Australian health insurance revenue and losses in Australia aged care

▪ Health Insurance: Revenue was down due to the actions we took to support customers. Delayed the approved premium rate increase for all customers for six months and established a £20m financial hardship scheme.

▪ Health Services: Revenue growth driven by new Australian DefenceForce contract.

▪ Australia Villages and Aged Care: Reported loss due to COVID-19 related costs including PPE and increased staff costs. Year end occupancy rate was 85% (2019: 83%).

▪ New Zealand Villages and Aged Care: Revenue improved with the year end occupancy rate increasing to 91% (2019: 89%).

Operating environment

▪ Australia and New Zealand economies impacted by COVID-19 pandemic despite relatively short lockdown timeframes.

▪ Royal Commission into Aged Care Quality and Safety in Australia published its final report this week.

£4.7bn2019: £4.6bn CER

+2% AER +3% CER

Underlying profit

£113m2019: £158m CER

-29% AER -28% CER

Combined operating ratio1

Bupa HI Pty Ltd (Australia)

Revenue Revenue by businessA. Bupa Health

Insurance 78%B. Bupa Health Services 12%C. Bupa Villages and Aged Care

Australia 7%D. Bupa Villages and Aged Care

New Zealand 3%

202095%2

201994%

9



Europe and Latin America

1 Sanitas S.A de Seguros (Spain): Prepared under local GAAP (unaudited).2 Bupa Mexico is not displayed on the chart as its revenue accounts for below 1%

Modest revenue growth and good profit performance


▪ Spain: COVID-19 impacting economy.

▪ Poland: Uncertain economic outlook.

▪ Turkey: Positive outlook with economy predicted to recover in 2021.

▪ Latin America: Political and economic uncertainty expected to continue.

£3.8bn2019: £3.7bn CER

- 2% AER+3% CER

Underlying profit

£184m2019: £155m CER

+18% AER +19% CER

Combined operating ratioSanitas S.A de Seguros (Spain)

Revenue Revenue by business2

A. Sanitas Seguros 32%B. Sanitas Dental 4%C. Sanitas Hospitals 6%D. Sanitas Mayores 4%E. Bupa Chile 25%F. LuxMed (Poland) 11%G. Bupa Acıbadem Sigorta (Turkey) 5%H. Care Plus (Brazil) 5%I. Bupa Global Latin America 8%

202084%1

201989%

A

BC

DE

F

GH

I

Spain:

▪ Sanitas Seguros: Solid revenue growth. Underlying profit grew due to lower claims.

▪ Sanitas Dental: Performance was impacted by temporary closures of centres due to lockdowns.

▪ Sanitas Hospitals: Revenue declined during lockdown. Underlying loss driven by the temporary suspension of elective treatments.

▪ Sanitas Mayores: Decline in revenue and an underlying loss due to reduced occupancy levels at 76% (2019: 96%).

Other countries:

▪ Bupa Chile: Decline in revenue and underlying loss in hospitals and clinics business. Strong revenue and profit in health insurance due to lower claims.

▪ LuxMed (Poland): Revenue growth and stable profit.

▪ Bupa Acıbadem Sigorta (Turkey): Performed well.▪ Care Plus (Brazil): Good revenue growth, stable

profit.▪ Latin America: Improved underlying performance.▪ Bupa Mexico: Improved results.

10



Bupa Global and UK

1 Bupa Insurance Limited: Prepared under local GAAP. Excludes our Irish insurer and our associate, Highway to Health (GeoBlue).

A

B

C

DE

Provision and aged care businesses impacted by COVID-19

▪ UK Insurance: Revenue up on an underlying basis driven by growth in customer numbers, offset by commitment to pass back exceptional financial benefit ultimately arising from the pandemic to UK PMI customers and investment in telehealth.

▪ Bupa Global: Revenue stable and underlying profit grew reflecting favourable claims.

▪ Dental Care: Revenue reduced and reported an underlying loss due to temporary closure of practices.

▪ Health Services: Performance down due to temporary closure of clinics.

▪ Care Services: Revenue down and reported an underlying loss due to the impact of COVID-19. Year end occupancy 82% (2019: 87%).


▪ Public vaccination plan in the UK making good progress.

▪ Roadmap to cautiously ease lockdown restrictions released.

£3.1bn2019: £3.2bn CER

-6% AER-6% CER

Underlying profit

£110m2019: £116m CER

-6% AER-5% CER

Combined operating ratio1

Bupa Insurance Ltd (UK)

Revenue Revenue by businessA. Bupa UK Insurance 46%B. Bupa Global 26%C. Bupa Dental Care 12%D. Bupa Care Services 12%E. Bupa Health Services 4%

202092%

201995%

11



Other businesses

▪ Revenue stable at £494m.

▪ Underlying profit up 33% to £61m, mainly reflecting favourableperformance in Bupa Arabia.

Bupa Arabia

▪ Favourable performance

▪ In August, we further increased our stake in Bupa Arabia by 4% to 43.25%.

Max Bupa (India)

▪ Improved performance

▪ Relationship with new partner, True North, progressing well.

Image box

Bupa Hong Kong

▪ Revenue was flat with the impact of reduced activity in our clinics, offset by improved performance in insurance.

12



Financial review



13



Financial highlights

Solvency II capitalcoverage ratio1

Statutory profit/ (loss)before taxation

Underlying profitbefore taxation

1 The 2020 Solvency II capital position is an estimate, and it is unaudited.

160%2019: 159%

£410m2019: £(78)m AER

£388m2019: £404m CER-7% AER-4% CER

14



Financial overview

▪ Revenue was broadly flat at CER as a result of growth in our Australia and New Zealand and Europe and Latin America Market Units, offset by a decline in Bupa Global and UK.

▪ Revenue in our health insurance businesses stayed broadly flat.

▪ Health provision revenue grew 3% driven by the full year contribution of the ADF contract in Australia.

▪ Aged care revenue was down 3%, reflecting significantly reduced occupancy rates.

▪ Underlying profit declined by 4% at CER with the performance of the insurance businesses partially offset by the challenging conditions in our health provision and aged care businesses.

▪ Central expenses and net interest expense were £9m higher than 2019, largely driven by lower investment returns and new bond issue costs.

▪ The Group’s combined operating ratio decreased by 2ppts to 92%.

▪ The improvement is driven by lower claims as a result of the disruption to elective healthcare procedures from COVID-19, partly offset by additional reserve for deferred claims in Australia and a return-of-premium provision of in UK Insurance.

Revenue Underlying profit before taxation1 Combined operating ratio2

2020£12.1bn

2019 (CER)£12.1bn

-2% AER0% CER

2020£388m

2019 (CER)£404m

-7% AER-4% CER

202092%

201994%

-2 ppts

1 Underlying profit is a non-GAAP financial measure. This means it is not comparable to other companies. Underlying profit reflects our trading performance and excludes a number of items included in statutory profit before taxation, to facilitate year-on-year comparison. These items include impairment of intangible assets and goodwill arising on business combinations, as well as market movements such as gains or losses on foreign exchange, on return-seeking assets, on property revaluations and other material items not considered part of trading performance.2 Combined operating ratio is an alternative performance metric for insurance businesses. It is calculated based on incurred claims and operating expenses divided by net earned premiums. The Group combined operating ratio is calculated based on the S.05.01 Prudential Regulation Authority (SII) form (estimated and unaudited).

15



Statutory profit

Statutory profit before taxation was £410m, up £488m on 2019, primarily due to goodwill impairments made in 2019 not recurring.

2020£m

2019 (AER)£m

Underlying profit before taxation 388 416

Impairment of intangible assets and goodwill arising on business combinations (12) (443)

Net loss on disposal of businesses and transaction costs on business combinations (1) (31)

Net property revaluation gains 26 6

Realised and unrealised foreign exchange losses (2) (23)

Gains on return seeking assets, net of hedging 15 28

Other non-underlying items (4) (31)

Total non-underlying items 22 (494)

Statutory profit/(loss) before taxation 410 (78)

16



Solvency1

1 The 2020 Solvency II capital position, SCR and coverage ratio are estimates and unaudited.2 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.3 Group Specific Parameter (GSP) is substituted for the insurance premium risk parameter in the standard formula, reflecting the Group’s own loss experience

Solvency II coverage ratio

Solvency Capital requirement £2.5bn

Own Funds

Surplus £1.5bn

£4bn

2019 159%

2020 160%

2020 Solvency position ▪ Capital coverage at the year end was 160% with £1.5bn surplus over Group SCR.

▪ Property (e.g. care homes, hospitals and clinics) remains the most sensitive risk to our capital coverage.

▪ We operate within a target capital working range of 140% to 170% of SCR.

160%

145%

153%

157%

159%

159%

159%

160%

160%

Solvency Coverage Ratio

Property values - 10%

FY20 loss ratio worsening by 2%

Interest rate -100bps

Sterling depreciates by 10%

Group specific parameter (GSP)3 +0.2%

Credit spreads + 100bps assuming no credit transition

Pension risk +10%

Equity markets -20%

Risk sensitivities2

17



Solvency1

Movement in Solvency II capital surplus from FY 2019 to FY 2020

1 The 2020 Solvency II capital position, SCR and coverage ratio are estimates and unaudited.2 Operating capital of £530m includes adjusted IFRS comprehensive income, reflecting SII valuation differences and the exclusion of non- operating items.3 Capital tiering restrictions are applied because the aggregate value of eligible Tier 2 and Tier 3 Own Funds cannot exceed 50% of the Group Solvency Capital Requirement.

530350

30

180

110

100

330

120

SolvencySurplusFY 2019

Operating2capital

Net Capex Cost of debtfinancing

M&A Activity Tier 2sub debtissued

RestrictedTier 1

sub debtredeemed

Capital tieringrestrictions

Other3 SolvencySurplusFY 2020

3

1,450

1,520

2

18



Funding

Leverage ratio1Leverage broadly flat on 2019, liquidity strong

1 Leverage is calculated based on gross debt (including hybrid debt) divided by gross debt plus equity.

Debt maturity profile

25.3%

0

200

400

600

800

1000

2020 2021 2022 2023 2024 2025 2026 >2026

Bupa Finance plc SeniorBupa Finance plc Senior Tier 2 SubordinatedBank facilities

▪ Leverage broadly flat year on year. This is due to the bond issuance in June, offset by the £330m bond payment in September and other bank borrowings.

▪ At 31 December 2020, we had no drawings under our £800m revolving credit facility (2019: £230m).

▪ Fitch downgraded Bupa’s credit ratings in March 2020. Moody’s put our ratings on negative outlook in April 2020. We continue to liaise closely with both agencies.Leverage ratio when accounting for

IFRS 16 lease liabilities

FY 2020 32.4%

FY 2019

FY 201831.1%

FY 2020 25.3%

HY 2020

FY 201925.1%

HY 201924.3%

FY 201823.5%

27.3%

32.7%

19



Cash and investment portfolio 2020 cash and investments by credit rating (%)Investment volatility

remained relatively low

▪ Net cash generated from operating activities increased by £646m to £1.3bn mainly reflecting the delay in claims outflows.

▪ Cash and investments materially higher, albeit we expect some reduction as claims rebound in 2021.

▪ Conservative portfolio, primarily cash-based but with circa £560m bond and loan funds.

▪ The return seeking asset portfolio showed gains in the period of £15m, down from £28m in 2019.

▪ Low yield environment continues to provide a challenging investment backdrop. Cash returns reduced further in 2020 as interest rates fell globally.

Cash and financial investments

AAA6%

<BBB-/NR10%BBB8%

A46%

AA30%

2020 £4.9bn

Cash and cash-like instruments (e.g. deposits, liquidity funds, covered bonds)

Return seeking assets

£3.9bn2019

Net cash generated from operating activities2020

2019 (AER)

+93% AER

£1.3bn

£0.7bn

Net cash generated from operating activities up £646m

20



Environmental Social and Governance (ESG)

We strengthened our internal ESG governance, established executive committees and a dedicated Environmental and Climate Action programme.

Received an upgrade to A from BBB in our latest MSCI ESG Ratings assessment1.

Worked on a new Environment and Climate Action plan, using Science Based Targets.

Established a global Healthy Communities Fund to respond to the pandemic.

Continued to support Bupa Foundations in Australia, the UK and Spain, and employee volunteering.

1 Disclaimer statement: the use by Bupa of any MSCI ESG Research LLC or its affiliates (“MSCI”) data, and the use of MSCI logos, trademarks, service marks or index names herein, do not constitute a sponsorship, endorsement, recommendation, or promotion of [entity] by MSCI. MSCI services and data are the property of MSCI or its information providers, and are provided ‘as-is’ and without warranty. MSCI names and logos are trademarks or service marks of MSCI 21



Outlook and operating priorities


22



Outlook and operating priorities

• COVID-19 will continue to impact economies, health systems and our businesses.

• Continuing to adapt and innovate to meet new demands and playing our part in helping our customers, people and society.

• Prioritising investment in digital and virtual health and enhancing our services.

• Well-placed to address these challenges and opportunities with underlying financial strength, a resilient organisation and a diversified business model.

• Developing our new strategy with a focus on excellence for customers, growth, transformation and sustainability.

A resilient business, well-placed for the future.

23



Q&A




24



Further information

Email [email protected]

Websitewww.bupa.com/corporate/our performance

Investors:[email protected]

25


Appendix

26


Bupa Group

Bupa’s purpose is helping people live longer, healthier, happier lives.

▪ Founded in 1947, Bupa is a private company limited by guarantee. With no shareholders, our customers are our focus. We reinvest profits to benefit our current and future customers.

▪ We provide health insurance to 17.9 m people around the world. We have health provision businesses serving another 13.6m customers and we also provide residential aged care services in selected markets.

▪ Over more than 70 years, our global footprint has grown from our origins in the UK to Australia, Spain, Poland, Chile, Brazil, Mexico, Turkey, the Middle East, the US, Hong Kong SAR, New Zealand and Ireland. We also have associate businesses in Saudi Arabia and India.

Australia andNew Zealand


Bupa Global and UK Bupa Hong Kong

Associate businesses in Saudi Arabia and India

IPMI:We also offer international private medical insurance (IPMI) for cover in most countries, including through our associate business Highway to Health (GeoBlue) in the US. In China, we have a representative office in Beijing and an integrated medical centre in Guangzhou.

27


Business mix

Bupa in the context of the wider insurance market

1 We also provide travel insurance, cash plans, subscription products and third party administration arrangements in different markets2 We have a growing domestic health insurance business in Mexico.3 We also have very small numbers of clinics in other Latin American countries including Peru4 We have an interest in the MyClinic business in Saudi Arabia

Health insurance1 Health insurance accounts for 72% of our total revenue with 17.9m insurance customers worldwide.Strong domestic health insurance presence in: UK, Australia, Spain, Chile, Hong Kong, Turkey, Brazil2 and Mexico and our associate businesses in Saudi Arabia and India

International Private Medical Insurance: h Bupa Global

Dental insurance: Australia, UK, Spain, Chile, Poland, Hong Kong SAR, Brazil and through Bupa Global

Provision Health provision accounts for 20% of our total revenue with 13.6m customers worldwide. We operate around 390 health clinics, 22 hospitals and over 1,000 dental centres.Hospitals: Spain, Chile, Poland and one in the UK

Dental centres: UK, Ireland, Australia, Spain, Chile, New Zealand, Poland, Brazil and Hong Kong SAR.

Clinics: Spain, Chile, Poland, the UK, Brazil3, Hong Kong SAR, Saudi Arabia4, Australia, New Zealand and China

Aged Care Residential aged care accounts for 8% of total revenue.We provide aged care services in the UK, Spain, Australia and New Zealand

Mot

or

Spec

ialis

t P&

C

Life

Pers

onal

Lin

es

28


Australia andNew Zealand


Bupa Global and UK Other

Australia New Zealand Spain1 Poland Turkey Chile BrazilBupa Global

Latin America2,3 MexicoUnited

Kingdom4Bupa

Global2Saudi

Arabia5 India5Hong

Kong SARMainland

China

Funding Health insurancePay-as-you-goDental insuranceTravel insuranceCash plans

Health provision ClinicsHospitalsDental centresOptical and audiology

Aged care provision Care homesRetirement villages

Bupa’s footprint and Market Units

1 In Spain we also have day care centres.2 Global international insurance coverage available in many countries. 3 BGLA’s main operations include Guatemala, Panama, Dominican Republic, Colombia, Ecuador, Bolivia and Chile and a provision business in Peru. 4 We also run dental centres in the Republic of Ireland.5 Bupa Arabia (Saudi Arabia) and Max Bupa (India) are associate businesses.

Australia and New Zealand

Australia:Bupa Health InsuranceBupa Health ServicesBupa Villages andAged Care Australia

New Zealand:Bupa Villages andAged Care NewZealand


Spain:Sanitas SegurosSanitas Hospitalesand New ServicesSanitas DentalSanitas Mayores1

Poland:LuxMedTurkey:Bupa AcıbademSigorta

Chile:Bupa ChileBrazil:CarePlusMexico:Bupa MexicoIPMI:Bupa GlobalLatin America2, 3

UK:Bupa UK InsuranceBupa Dental Care4

Bupa Care ServicesBupa Health ServicesIPMI:Bupa Global2

Bupa Global & UK Other

Saudi Arabia:Private health insurer, Bupa Arabia5, in which we have a 43.25% stake. We also have an interest in MyClinic, a health clinics business.India:Max Bupa5: Private health insurer in India, in which we hold a 44.42% stake.

Bupa Hong Kong:Health insurance and provision.Bupa China:Comprises our representative office in Beijing and an integrated medical centre in Guangzhou.

29


Breakdown of borrowings 2020

£m2019

£m

£330m perpetual hybrid bond (guaranteed by Bupa Insurance Ltd) - 345

£350m senior bond due 2021 350 350

£500m subordinated bond due 2023 503 502

£300m senior bond due 2024 310 302

£400m subordinated bond due 2026 397 397

£300m senior bond due 2027 300 -

£350m subordinated bond due 2035 347 -

Revolving credit facility - 230

Bupa Chile borrowings 177 184

Other 54 40

Total borrowings 2,438 2,350

30


Disclaimer

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 (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 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 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. To the fullest extent possible by receipt of, and using, this document, you release Bupa and each of its affiliates, advisers, directors, employees and agents, in all circumstances (other than fraud) from any liability whatsoever and howsoever arising from your use of this document. In addition, no responsibility of liability or duty of care is or will be accepted by Bupa or its respective affiliates, advisers, directors, employees and agents, for updating the document (or any additional information), correcting any inaccuracies in it or providing any additional information to any person.

Accordingly, none of Bupa or its affiliates, advisers, directors, employees or agents shall be liable (save in the case of fraud) for any loss (whether direct, indirect or consequential) or damage suffered by any person as a result of relying on any statement in, or omission from, the document.

Forward-looking statements in this document are current only as of the date on which such statements are made.

Neither the content of Bupa’s website nor the content of any other website accessible from hyperlinks on Bupa’s website is incorporated into, or forms part of, this document.

Cautionary statement concerning forward looking statements

31

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