TIDMBUPF
RNS Number : 8429U
BUPA Finance PLC
04 August 2022
Bupa Finance plc (Bupa Finance)
HALF YEAR STATEMENT FOR THE SIX MONTHS TO 30 JUNE 2022
KEY POINTS
* Revenue [1] of GBP6.7bn was up 4% (HY 2021: GBP6.4bn)
at constant exchange rates (CER) with year-on-year
financial growth in all our lines of business.
* Underlying profit [2] before taxation of GBP280m was
up 22% at CER (HY 2021 [3] GBP229m). Continued
implementation of our 3x6 strategy has driven
portfolio growth in health insurance, alongside good
trading performance in health provision businesses.
This was offset by the continued challenges from
further waves of COVID-19 in Australia and New
Zealand and the recruitment and retention of
healthcare workers impacting our health provision
businesses, notably UK Dental, and aged care
businesses in UK and Australia. While achieving this
positive growth year-on-year, we continue to invest
in digitalisation and meeting our sustainability
ambitions in line with our strategy.
* Statutory profit before taxation of GBP189m was down
35% at AER (HY 2021: GBP291m). This was driven by:
non-underlying trading items, including a net
monetary loss in Türkiye due to hyperinflation
(GBP38m); continued market uncertainty from both the
war in Ukraine and inflationary pressures, which lead
to volatility and losses in our return-seeking assets
(GBP41m); the accelerated amortisation of aged care
bed licences in Australia following changes in
government regulations which will become effective in
2024 (GBP17m); and the non-recurrence of a gain made
upon the transfer of CS Healthcare customers in 2021
(GBP39m).
* Solvency II capital coverage ratio [4] remains strong
at 181% (FY 2021: 179%) with leverage (excluding IFRS
16 liabilities) improving to 19.5% (HY 2021: 25.0%).
Performance review: "These results show positive progress
across our business as we continue to deliver our 3x6 strategy
which will position Bupa to satisfy major shifts in customer
expectations and engagement with healthcare. We're pleased
that our focus on driving transformation across digitalisation
and customer service has led to strong organic growth. "
Market performance (all at CER)
* Bupa Asia Pacific [5] : Revenue decreased by 3% to
GBP2,691m largely due to the continued commitment to
return savings from COVID-19 to our Australian Health
Insurance customers, ongoing portfolio optimisation
in our dental and aged care businesses as well as the
impact of the pandemic across these underlying
businesses. Underlying profit was GBP131m, a decrease
of 5% reflecting localised lockdowns and staff
availability in our Health Services business and
increased costs and reduced occupancy in our aged
care businesses due to the impacts of COVID-19.
* Europe and Latin America: Revenue grew by 11% to
GBP2,138m, however underlying profit declined by 29%
to GBP57m as customer growth across most businesses
was more than offset by increased claims levels in
our insurance businesses due to the reduced
disruption from COVID-19 and ongoing challenges in
Bupa Chile as a result of regulatory interventions
and judicial decisions.
* Bupa Global and UK: Revenue was up 9% to GBP1,822m
through an increase in customers across insurance and
provision businesses, alongside improved occupancy
rates in our UK aged care business. Underlying profit
grew to GBP74m (HY 2021: GBP16m) as a result of the
performance of the insurance businesses, with Bupa
Global, our International Private Medical Insurance
(IPMI) business, returning to profitability.
* Other businesses: Underlying profit of GBP30m is flat
year-on-year driven by performance in our associate
businesses as they continue to emerge from the
pandemic.
Financial position
* Solvency II capital coverage ratio of 181% (FY 2021:
179%).
* Leverage is 26.7% (HY 2021: 32.1%) when including
IFRS 16 leases as liabilities. Excluding these
liabilities, the leverage ratio is 19.5% (HY 2021:
25.0%).
* Net cash generated from operating activities was
GBP696m, up GBP217m on prior year (HY 2021: GBP479m)
primarily due to higher revenue across the Market
Units (MUs) and lower claims in Australia as a result
of the continued disruption from COVID-19.
Operational highlights
* We launched a new sustainability strategy through
which we will achieve our ambition to become a Net
Zero business by 2040 across all emissions scopes.
* Through our business in Poland, LuxMed, we have been
providing a substantial package of free healthcare
support to thousands of Ukrainian refugees who have
been forced to flee the war.
* We became the Official Healthcare Partner to
ParalympicsGB, joining our existing partnerships with
Paralympians in Spain, Poland and Chile.
Enquiries
Media
Duncan West (Corporate Affairs): duncan.west@bupa.com
Investors
Gareth Evans (Treasury): ir@bupa.com
About Bupa Finance plc
Bupa Finance plc (the Company) is a company incorporated in
England and Wales. The Condensed Consolidated Half Year Financial
Statements comprise the financial results and position of the
Company and its subsidiary companies (together referred to as the
Group). The immediate and ultimate parent of the Company is The
British United Provident Association Limited (the Parent), which is
also the ultimate parent company of the Bupa Group (Bupa).
Bupa's purpose is helping people live longer, healthier, happier
lives and making a better world.
We are an international healthcare company serving over 38
million [6] customers worldwide. With no shareholders, we reinvest
profits into providing more and better healthcare for the benefit
of current and future customers.
We directly employ around 85,000 people, principally in the UK,
Australia, Spain, Chile, Poland, New Zealand, Hong Kong SAR,
Türkiye, Brazil, Mexico, the US, Middle East and Ireland. We also
have associate businesses in Saudi Arabia and India.
Disclaimer: Cautionary statement concerning forward-looking
statements
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.
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.
Management review
These results demonstrate positive performance across the Group.
We are seeing the benefits of our progress during the early stages
of the roll-out of our 3x6 strategy. Our strategic focus on driving
significant transformation around digitalisation and customer
service improvements has led to strong organic growth in a number
of our businesses. We have embedded our new values across Bupa and
these are guiding our actions in how we support both our customers
and employees through a cost of living crisis, and wider society
during geopolitical instability. We also finalised our new global
approach to Sustainability.
Under the new strategy, we have embedded a portfolio management
approach. This enables a sharp focus on how each business unit is
contributing to overall performance and aligns to our long term
strategy, and how capital should be deployed. In health insurance,
in particular, we have had continued customer growth in established
businesses such as Sanitas Seguros in Spain and UK Insurance, as
well as in businesses with long term potential growth such as Bupa
Acıbadem Sigorta in Türkiye . We also achieved positive progress in
businesses where performance has been challenged recently, such as
Sanitas Mayores, our aged care business in Spain, where occupancy
is improving, and in Bupa Global, our IPMI business, where
management action is resulting in signs of recovery.
Outlook
We are continuing to navigate the impacts of COVID-19, both
direct and indirect, across our markets, although these are
generally reducing in most locations. The recruitment and retention
of healthcare workers remains an ongoing sector-wide challenge in
multiple markets - impacting our health provision businesses,
notably UK Dental, and aged care businesses in UK and
Australia.
Inflation continues to increase costs for our businesses and for
our customers, although we are encouraged by recent customer growth
across our markets as they see value from the healthcare services
we provide. In Chile, ongoing political and judicial challenges,
along with uncertainty regarding future premium rate rises set by
the regulator, continue to affect our isapre insurance business and
present us with an increasingly uncertain operating environment in
the medium term. We are in detailed dialogue with government and
relevant national authorities to push for reforms to ensure sector
sustainability, although the political and social environment is
complex and uncertain, with the outcome of the national referendum
taking place in September 2022 giving heightened risk to local
financial markets in the near term.
Although we have challenges in some businesses, we're seeing
continued strong demand for our products and services to meet
changing customer needs, particularly digital access to healthcare.
Through our 3x6 strategy, we are focused on expanding the
availability of these services across all of our markets. We are
encouraged by the positive overall performance across the Group and
how our businesses are transforming while continuing to deliver for
our customers.
FINANCIAL REVIEW
Summary
HY 2022 HY 2021 (AER) % growth/ (decline) HY 2021 % growth/
(CER) (decline)
Revenue GBP6.7bn GBP6.5bn 3% GBP6.4bn 4%
--------- -------------- ------------------- --------- ----------
Underlying profit GBP280m GBP234m 20% GBP229m 22%
--------- -------------- ------------------- --------- ----------
Cash generated from GBP696m GBP479m 45% n/a n/a
operating activities
--------- -------------- ------------------- --------- ----------
Statutory Profit GBP189m GBP291m (35%) GBP286m (34%)
--------- -------------- ------------------- --------- ----------
Leverage (excl.
IFRS 16) 19.5% 25.0 % 5.5 ppts n/a n/a
--------- -------------- ------------------- --------- ----------
Leverage (incl.
IFRS 16) 26.7% 32.1 % 5.4 ppts n/a n/a
--------- -------------- ------------------- --------- ----------
Solvency 181% 179% [7] 2 ppts n/a n/a
--------- -------------- ------------------- --------- ----------
Revenue (CER)
Revenue was up 4% as a result of portfolio growth, price rises
in a majority of our health insurance markets to keep pace with
global inflation, and increased activity in our health provision
businesses.
Revenue in health insurance grew by 4%. Insurance customer
growth was 8% (16% year-on-year growth when including our associate
businesses), driven by strong new sales in the UK and continued
growth in our Polish, Turkish and Brazilian businesses. This was
partially offset by the announcement to return further cash to our
Australian health insurance customers.
Our health provision businesses saw revenue growth of 4%
reflecting higher customer numbers as the impacts of COVID-19
subsided and health facilities continued to remain open.
In our aged care businesses, revenue was up 5% as occupancy
rates increased by 2% driven by UK Care Services and Sanitas
Mayores. COVID-19 challenges remained in our Australian and New
Zealand businesses as localised lockdowns and sector-wide staffing
availability continued to impact occupancy levels.
Underlying profit (CER)
Group underlying profit increased by 22% to GBP280m (HY 2021:
GBP229m at CER).
For our largest line of business, health insurance, underlying
profit increased driven by continued portfolio growth. Price
increases in a majority of markets were broadly offset by higher
claims inflation. We saw reduced claims levels in Australian Health
Insurance in the first quarter as localised lockdowns persisted,
and we therefore still hold a deferred claims reserve of GBP231m
(30 June 2021: GBP180m).
In Chile, we continue to see the impacts of regulatory
interventions and judicial decisions on the isapre insurance sector
which have caused underlying losses to continue to grow in our
Chilean insurance business.
In the UK in 2021, we paid GBP125m to eligible health insurance
customers in return of premium following the pledge we made in
April 2020 to pass back any exceptional financial benefit
ultimately arising from the temporary disruption to some medical
treatments as a consequence of COVID-19. As at 30 June 2022, we
continue to hold a return of premium provision of GBP60m. It
represents the best estimate of exceptional financial benefits
occurring from 23 March 2020 to 31 December 2021.
Profitability continued to grow in our health provision
businesses, as restrictions in place reduced in 2022. However, we
continue to see challenges in UK Dental driven by sector-wide
pressures, including an ongoing shortage of dentists, particularly
in NHS work, and of dental nurses. It is clear the pressures on the
business mean poor returns will persist in the near term.
Underlying losses in aged care increased slightly year-on-year.
Our Australian and New Zealand villages and aged care businesses
continued to manage COVID-19 as the Omicron outbreak in early 2022
led to the majority of our 59 Australian care homes either putting
in place lockdowns or other restrictions, alongside higher staffing
costs to minimise sector wide staff shortages. These losses were
offset by improved closing occupancy rates in Sanitas Mayores and
UK Care Services.
Central expenses and net interest margin of GBP12m were lower
(HY 2021: GBP36m at CER). This was driven by higher investment
returns from increased interest rates, alongside reduced costs from
the redemption of the GBP250m subordinated bond and maturity of a
GBP350m senior bond in 2021.
Statutory profit
Statutory profit before taxation was GBP189m down 35% at AER (HY
2021: GBP291m), driven by non-underlying results . The
non-underlying items totalled to a GBP91m loss in 2022, compared
with GBP57m profit in 2021.
The key drivers for non-underlying items in 2022 include Türkiye
being considered a hyperinflationary economy. As a consequence, the
results and balances for the Group's Turkish operations have been
adjusted for changes in the general purchasing power of the Turkish
Lira (GBP38m) and this is recognised in 'realised and unrealised
foreign exchange (losses)/gains'. Losses on our return seeking
assets grew as the war in Ukraine and the impact of rising
inflation continues to impact market volatility (GBP41m). Also
included is the amortisation of intangible assets in Bupa Villages
and Aged Care Australia following the government announcement to
deregulate bed licences from 2024 (GBP17m) and restructuring costs
(GBP10m).
2022 2021
GBPm GBPm
Bupa Asia Pacific at CER 131 138
------ ------
Europe and Latin America at CER 57 80
------ ------
Bupa Global and UK at CER 74 16
------ ------
Other businesses at CER 30 31
------ ------
Underlying profit for reportable segments at
CER 292 265
------ ------
Central expenses and net interest margin at
CER (12) (36)
------ ------
Consolidated underlying profit before taxation
at CER 280 229
------ ------
Foreign exchange re-translation on 2021 results
(CER/AER) - 5
------ ------
Consolidated underlying profit before taxation
at AER 280 234
------ ------
Impairment of intangible assets and goodwill
arising on business combinations - (1)
------ ------
Net (losses)/gains on disposal of businesses
and transaction costs on business combinations (2) 9
------ ------
Net property revaluation gains 11 7
------ ------
Realised and unrealised foreign exchange (losses)/gains (32) 9
------ ------
Amortisation of bed licences (17) -
------ ------
Other non-underlying items (10) 30
------ ------
(Losses)/gains on return-seeking-assets, net
of hedging (41) 3
------ ------
Total non-underlying items (91) 57
------ ------
Statutory profit before taxation at AER 189 291
------ ------
Taxation
The Group's effective taxation rate for the period was 32% (HY
2021: 25%; FY 2021: 18%), which is higher than the current UK
corporation taxation rate of 19%. This is mainly due to profits
arising in jurisdictions with a higher rate of corporation taxation
than the UK, irrecoverable overseas taxation on group dividend
income and the impact of non-deductible IAS 29 adjustments applied
as a result of hyperinflation in Türkiye.
Cash flow
Net cash generated from operating activities increased by
GBP217m to GBP696m primarily due to higher revenue across the MUs
and lower claims in Australia as a result of the continued
disruption due to COVID-19 which has in turn driven the increase in
cash used in investing activities by GBP541m to GBP737m.
Net cash used in financing activities decreased by GBP162m to
GBP174m primarily due to the one-off repayment and buy-back of
bonds in 2021 and reduction in the use of the Group's revolving
credit facility in 2022.
Funding
We manage our funding prudently to ensure a strong platform for
continued growth. This requires us to ensure we maintain good
access to both senior and subordinated bond markets. A key element
of our funding policy is to target an A-/A3 senior credit rating
for the Company, the main issuer of Bupa's debt. Our senior ratings
are currently A3 (negative) by Moody's and BBB+ (stable) by Fitch.
There have been no changes to our ratings in 2022 apart from a one
notch improvement to the Moody's rating of Bupa's Restricted Tier 1
bond in January, following a change to their methodology.
We continue to hold a good level of Group liquidity. At 30 June
2022, our GBP900m Revolving Credit Facility was drawn by GBP230m.
Coverage of financial covenants within the facility remains strong.
Liquidity is also managed by Bupa's local insurance entities to
ensure they have sufficient stand-alone capacity to absorb future
cashflow requirements.
We focus on managing our leverage in line with our credit rating
objectives. Leverage excluding operating leases at 30 June 2022 was
19.5% (HY 2021: 25.0%) and was 26.7% (HY 2021: 32.1%) when IFRS 16
lease liabilities are taken into account.
Solvency
Our solvency coverage ratio of 181% remains strong and is above
our target working range of 140-170%.
The Group holds capital to cover its Solvency Capital
Requirement (SCR), calculated on a Standard Formula basis,
considering all our risks, including those related to non-insurance
businesses. As at 30 June 2022, the estimated SCR of GBP2.7bn was
GBP0.2bn higher and Own Funds of GBP4.9bn was GBP0.4bn higher when
compared to 31 December 2021.
Our surplus capital was estimated to be GBP2.2bn, compared to
GBP2.0bn at 31 December 2021, representing a solvency coverage
ratio of 181% (FY 2021: 179%). Our business continued to generate
capital through our underlying profitability. This capital
generation was partially offset by capital expenditure and debt
financing activities.
We perform an analysis of the relative sensitivity of our
estimated solvency coverage ratio to changes in market conditions
and underwriting performance. Each sensitivity is an independent
stress of a single risk and before any management actions. The
selected sensitivities do not represent our expectations for future
market and business conditions. A movement in values of properties
that we own continues to be the most sensitive item, with a 10%
decrease having a 11% percentage point reduction to the solvency
coverage ratio.
Our capital position is resilient in the face of the individual
risks, illustrating the strength of our balance sheet.
Risk Sensitivities Solvency II
coverage ratio
Solvency coverage ratio 181%
----------------
Property values -10% 170%
----------------
Sterling depreciates by 20% 173%
----------------
Loss ratio worsening by 2% 174%
----------------
Group Specific Parameter (GSP) [8] +0.2% 179%
----------------
Credit spreads +100bps (no credit transition) 180%
----------------
Interest rate -100bps 180%
----------------
Pension risk +10% 181%
----------------
Equity markets -20% 181%
----------------
We include a GSP in respect of the insurance risk parameter in
the Standard Formula. We apply a premium recognition adjustment to
the GSP loss ratio data to allow for the distorting impact of the
COVID-19 pandemic. The PRA have confirmed its approval of this
approach at the end of 2021.
MARKET UNIT PERFORMANCE
Bupa Asia Pacific [9]
Revenue Underlying profit
[10]
HY 2022 GBP2,691m GBP131m
HY 2021 (AER) GBP2,779m GBP139m
% decline (3%) (6%)
HY 2021 (CER) GBP2,787m GBP138m
% decline (3%) (5%)
Revenue declined by 3% to GBP2,691m at CER. This was driven by
our decisions to: return cash to Australian health insurance
customers; defer health insurance premium increases; and from
divestments as part of ongoing portfolio optimisation in our aged
care and dental businesses. Underlying profit declined by 5% to
GBP131m, driven by the continued challenge of COVID-19, impacting
staff availability in Australian Health Services, and aged care in
Australia and New Zealand, where sector-wide staff shortages and
localised lockdowns reduced occupancy.
In Australian Health Insurance, revenue declined due to our
ongoing commitment to return savings from COVID-19. In June, we
announced a further return of cash to customers of GBP86m
(AUD$155m), which will be paid from October 2022. We also announced
the deferral of our 2022 premium increase until 1 November. Through
our package of cash returns, premium deferrals, financial
assistance and other customer support programmes, we have provided
GBP355m (AUD$640m) of support to customers since the pandemic
started. The combined operating ratio (COR) was 92% [11] (HY 2021:
93%). Since the beginning of 2022, we have seen a strong take up by
new domestic retail customers of our FLEXtras product, which
enables customers to select personalised services and limits. We
maintained market share at 24.7% as at March 2022 and have held
this position for three consecutive quarters [12] .
Australian Health Services revenue declined due to localised
lockdowns and staff availability driven by the pandemic, clinician
vacancies and dental practice divestments as part of ongoing
portfolio optimisation. This resulted in underlying profit
declining. We continue to develop Blua, our digital healthcare
platform, which we launched in December 2021.
Revenue in Australian Villages and Aged Care decreased driven by
lower occupancy arising from the COVID-19 Omicron outbreak in early
2022. Underlying losses increased due to lower occupancy, increased
pandemic-related staff costs and personal protective equipment
costs. Closing occupancy was 83% (HY 2021: 88%). Changes in
government regulations regarding the derecognition of bed licences
effective in 2024, have led to accelerated amortisation and a loss
of GBP17m for the first half of 2022 being recorded outside of
underlying profit.
In New Zealand Villages and Aged Care, revenue was stable as
strong village sales volumes offset reduced occupancy. Underlying
losses increased from the continued impact of COVID-19 on occupancy
and increased staffing costs. As part of continued portfolio
optimisation, we opened a new retirement village in March, a care
home in May and closed three other care homes. Closing occupancy
was 85% (HY 2021: 88%).
In our Hong Kong SAR businesses, revenue was ahead despite the
continued disruption from COVID-19. Underlying losses improved
driven by operating cost reductions and the closure of one clinic.
We opened three new medical and four dental centres. We are also
making progress in expanding digital health services and over
200,000 users have now been connected to these services, including
100,000 new users in the first half of 2022.
Europe and Latin America
Revenue Underlying profit
HY 2022 GBP2,138m GBP57m
HY 2021 (AER) GBP2,016m GBP79m
% growth/(decline) 6% (28%)
HY 2021 (CER) GBP1,922m GBP80m
% growth/(decline) 11% (29%)
Revenue grew by 11% to GBP2,138m and underlying profit declined
by 29% to GBP57m at CER. The impact of customer growth across most
businesses was more than offset by increased claims levels in our
insurance businesses resulting from the reduced disruption to
services from COVID-19.
Sanitas Seguros, our health insurance business in Spain,
delivered good revenue growth driven by increased customer volumes
as we reached the milestone of two million customers in June 2022,
with distribution agreements with bancassurance partners
contributing to more than a third of sales. Underlying profit
declined as a result of the normalisation of claims following
COVID-19 and the COR for the half year was 91% [13] (HY 2021: 89%).
We continued to expand digital services and in June, we reached an
average of 66,000 video consultations per month.
Revenue and underlying profit in our Dental business in Spain
increased compared to June 2021 driven by higher customer volumes
as lockdown restrictions eased.
In our Hospitals and New Services business in Spain, revenue was
down through the impact of divestments in the second half of 2021,
while underlying profit was slightly ahead. We launched our new
physiotherapy model, new clinical units (covering robotic surgery,
rheumatology, obesity and breast cancer) and also announced a new
hospital in Madrid, which is expected to open in 2025.
In Sanitas Mayores, our aged care business in Spain, revenue and
underlying performance improved through higher occupancy levels and
as we improved operating efficiency. Closing occupancy rates
increased to 91% (HY 2021: 80%).
In Chile, revenue improved, however, underlying losses increased
as a result of higher claim volumes in our isapre insurance
business. The whole sector is facing severe financial challenges
marked by ongoing losses. This is as a result of a series of
regulatory interventions and judicial decisions which mean that
pricing actions are being challenged and delayed. These decisions
include: successive scheduled sector price adjustments being
blocked; mandated financing of parental medical leave; and
continued judicial challenges towards the premium price base. We
expect continued challenges and are engaging directly with the
local regulator and other stakeholders to attempt to stabilise the
position. If these risks to the isapre business materially
deteriorate, there is a future risk of impairment to Bupa Chile. In
our health provision business, we opened a new medical centre in
Santiago and increased activity drove higher revenue and underlying
profit.
In Poland, LuxMed revenue increased and underlying profit was up
as a result of strong performance in health provision. We launched
a special healthcare and work support programme for Ukrainian
refugees forced to flee the war, which continues across our
national network.
Bupa Acıbadem Sigorta, our health insurance business in Türkiye
, delivered substantial revenue growth driven by organic growth in
customers. Underlying losses increased as underlying claims volumes
increased and as the country entered a period of hyperinflation.
The economy is now a hyperinflationary environment, leading to a
change in accounting treatment (IAS 29, see Financial Review for
more detail) and a net monetary loss of GBP38m being recorded
outside of underlying profit.
Care Plus in Brazil delivered significant revenue growth as a
result of a substantial increase in customer numbers. Underlying
profit decreased driven by higher claims and increased
inflation.
Bupa Mexico delivered good revenue due to pricing, portfolio mix
and launch of new products in partnership with BBVA. Underlying
profit remained flat to 2021.
Bupa Global Latin America (BGLA) underlying profit improved as a
result of entry into the domestic health insurance market in
Ecuador and as pandemic related provisions were released.
Bupa Global and UK
Revenue Underlying profit
HY 2022 GBP1,822m GBP74m
HY 2021 (AER) GBP1,660m GBP16m
% growth 10% 363%
HY 2021 (CER) GBP1,669m GBP16m
% growth 9% 363%
We achieved good revenue growth of 9% to GBP1,822m driven mainly
by an increase in UK Insurance customers, the continued return
towards normal trading volumes in Health Services, and improved
occupancy rates in UK Care Services. Underlying profit grew
substantially as a result of the performance of the insurance
businesses, with Bupa Global, our IPMI business, returning to
profitability.
UK Insurance delivered strong revenue growth, with a significant
growth in customers of over 150,000 across private medical
insurance, health trusts, dental and cash plan so far during 2022,
and the impact of the return of premium in 2021. Underlying profit
increased with volume growth and price increases offsetting claims
returning towards normal levels. We launched new specialist centres
for bowel cancer within the Bupa Cromwell Hospital and HCA
Healthcare UK, giving customers faster access to diagnostics and
treatment. We continued to expand our digital services with over
500,000 direct customers now registered on Bupa Touch and almost
nine out of ten business customers registered for our Bupa Connect
portal, offering online access to cover and benefits.
In Bupa Global, revenue increased and profitability improved,
driven by: increased customer volumes, strong retention, and
pricing adjustments to reflect claims inflation. We have
reorganised the business by creating three regional units: Middle
East & Asia Pacific, Europe and UK & Africa. This supports
our plans for long-term sustainable growth by responding to the
distinct needs of our customers and our people in each region, with
an increased focus on digital experience.
The COR for Bupa Insurance Limited, the UK based insurance
entity that underwrites both domestic and international insurance,
improved to 93% [14] (HY 2021: 97%).
UK Dental's underlying losses increased driven by sector-wide
pressures, including an ongoing shortage of dentists, particularly
for NHS work, and of dental nurses. Productivity has not yet
returned to pre-COVID-19 levels, and the business was impacted by
increased costs due to workforce supply constraints, rising energy
prices, and growing consumer caution towards elective treatment as
a result of cost-of-living pressures. While the long-term
opportunity in UK Dental remains attractive, current industry
pressures mean poor returns will persist in the near term. We
launched our new digital B2C subscription product, Bupa Smile Plan,
to help customers access oral care in our clinics. We have also
continued the rollout of our cloud-based practice management
system, with 60% of the network transitioned and 210,000 digital
customer accounts created.
UK Care Services delivered strong revenue growth due to strong
fee rates and growing occupancy. Underlying losses are primarily
due to sector-wide staffing and inflation pressures, including
rising energy costs. We are continuing to transform our business
through digital innovation with the rollout of eCare, an electronic
care planning system, across 10 Richmond Villages and 39 care
homes. Closing occupancy was up to 85% (HY 2021: 82%).
In Health Services, revenue grew substantially and underlying
losses reduced, driven by higher customer numbers in Clinics and
the Cromwell Hospital and strong growth across all product and
service lines. We opened three new health clinics and the Cromwell
Hospital opened a new outpatient centre in London.
Other businesses [15]
Revenue [16] Underlying profit
HY 2022 GBP3m GBP30m
HY 2021 (AER) GBP2m GBP29m
% growth 50% 3%
HY 2021 (CER) GBP2m GBP31m
% growth/(decline) 50% (3%)
Underlying profit is broadly flat to 30 June 2021 driven by the
performance of our associate businesses: Niva Bupa in India and
Bupa Arabia in Saudi Arabia as both businesses continue to emerge
from the impacts of COVID-19.
BUSINESS RISKS
We described our main risks in the Risk section of the Annual
Report and Accounts 2021, which are available on www.bupa.com. In
the period to 30 June 2022, while we are still seeing impacts from
the COVID-19 pandemic in some of our markets, and we continue to
take appropriate actions to address these challenges, the principal
risks and themes previously identified at the 2021 year-end remain.
With a new strategy and a refreshed purpose, we also continue to
place significant emphasis on the risks associated with these.
While Bupa does not have businesses in either Ukraine or Russia,
the global macro-economic risks and human consequences of the
conflict are having an impact through inflation and other business
constraints, and we will continue to monitor any potential impacts
on Bupa's businesses.
Strategic and financial risks and risks impacting our ability to
deliver for our customers:
The macroeconomic environment is challenging in most markets we
operate in. In particular, in many markets we are seeing heightened
inflationary pressures. Medical inflation continues to increase at
a higher rate than income inflation and this is likely to be
exacerbated by weakened economic environments.
Heightened inflation is likely to impact our businesses in a
variety of ways, including: increased costs, higher interest rates
impacting households, reduced personal expenditure and
affordability issues, changes in government funding levels and
political instability. The potential impacts from inflation will be
a key focus of our stress testing programme this year, assessing
the impacts on both short-term profit and over the three year
plan.
In many markets, we continue to see strategic challenges
associated with workforce availability, which may impact our
ability to deliver services. We also see other risks associated
with the resilience of our own people, particularly as a result of
the pandemic, including health, safety and wellbeing, and
capacity.
Governmental and regulatory policy risks:
Changes in governmental and regulatory policy has consistently
been one of our top risks given the nature of our businesses and
this remains true. The significant governmental and regulatory
responses to the pandemic have shown that future legislation,
regulations and government funding decisions could have a material
impact on the Group, for example, the Australian government's
decision to deregulate bed licences. The situation affecting our
isapre insurance business in Chile is another example of
crystallising government and regulatory risks. We continue to
engage governments and regulators in the markets we operate in to
understand and influence potential changes to ensure we are able to
continue to deliver quality and value for our customers. Global
supply chains continue to remain challenged , and we have
heightened our supplier monitoring, management and communications
to help minimise disruption.
Operational risks:
Information Security and Privacy remain key risks for the Group.
Our focus on information security, technology and operational
resilience in recent years is supported by significant investment
to uplift capability and capacity in this area across the Group.
This investment has equipped us to effectively enhance digital and
telehealth services and enabled our people to work remotely.
Social and environmental risks:
Climate change remains one of the major risks we face as a
society and is a key area of focus for us as Sustainability is a
core pillar of our 3x6 strategy. We closely manage our
environmental impacts and promote positive environmental practices.
A key focus is our commitment to become a net zero business by 2040
across all our operations and throughout our value chain,
underpinned by our 1.5 degree aligned science-based targets.
We have identified our key climate-related risks over the short,
medium and long term. The principal risks we have identified are
reputational and regulatory compliance risk (short term), acute and
chronic physical risk impacting our property portfolio and aged
care businesses (medium to long term), and transition risk impacts
in the wider economy impacting affordability of our products and
services (medium to long term). The link between planet and human
health is clear and, therefore, there are also likely to be health
impacts from climate change which will impact health insurance
claims in the longer term (long term). We do not expect climate
change to have a material impact on our fixed assets or investment
and insurance risk exposures in the short term.
Our approach to risk management:
We have a well-established process for identifying and managing
all business risks, including all types of operational risk such as
information security and privacy. Monitoring and managing our risks
is key to ensuring that we achieve our strategic objectives in the
long-term, meeting the evolving expectations of our customers,
people, bondholders and regulators. Internal controls, particularly
regarding customer conduct and information security and privacy,
continue to be key areas of focus.
BUPA AROUND THE WORLD
Bupa Asia Pacific
-- Bupa Health Insurance Australia, with 4m customers, is a
leading health insurance provider in Australia and also offers
health insurance for overseas workers and visitors.
-- Bupa Health Services in Australia and New Zealand is a health
provision business, comprising dental, optical, audiology, medical
assessment services, and healthcare for the Australian Defence
Force.
-- Bupa Villages and Aged Care Australia cares for around 5,100
residents across 59 homes. It also operates 1 retirement village in
Australia.
-- Bupa Villages and Aged Care New Zealand cares for around
3,150 residents across 47 care homes. It also operates 38
retirement villages.
-- Bupa Hong Kong comprises a health insurance business, with
more than 400,000 customers, and a Health Services business
operating 91 medical centres providing healthcare services to
around 480,000 customers.
Europe and Latin America
-- Sanitas Seguros is the second largest health insurance
provider in Spain, with more than 2m customers.
-- Sanitas Dental provides dental services through 201 centres
and third-party networks in Spain.
-- Sanitas Hospitales and New Services comprise four private
hospitals, 30 private medical clinics and one public hospital under
a public-private partnership model.
-- Sanitas Mayores cares for around 5,500 people in 43 care
homes, operates six day-care centres and has professional home care
services with digital medical support for seniors in Spain.
-- LuxMed is a leading private healthcare business in Poland,
operating in health funding and provision through 14 hospitals and
267 private clinics.
-- Bupa Chile is a leading health insurer and health provision
business. In insurance we serve more than 839,000 customers. In
health provision we serve around 1.9m customers across four
hospitals and 38 medical clinics.
-- Bupa Acıbadem Sigorta is Türkiye's second largest health
insurer, with products for corporate and individual customers, and
has over 1.2m customers.
-- Care Plus is a leading health insurance company in Brazil,
with around 169,000 customers, concentrated in São Paulo.
-- Bupa Mexico is a health insurer offering international and
local private medical insurance to individuals and corporates in
Mexico, with more than 87,000 customers, and a health administrator
company with more than 300,000 customers.
-- Bupa Global Latin America provides international health
insurance, local health insurance, and travel insurance in Latin
America to around 68,000 customers. It is headquartered in Miami
and has operations in Guatemala, Panama, Dominican Republic,
Ecuador and Bolivia as well as a provision business in Peru.
Bupa Global and UK
-- Bupa UK Insurance is a leading health insurer, with 2.4m customers and 2.9m lives covered.
-- Bupa Global serves over 540,000 IPMI customers and
administers medical assistance for individuals, small businesses
and corporate customers.
-- Bupa Dental Care is a leading provider of private dentistry,
providing dental services through over 480 centres across the UK
and the Republic of Ireland.
-- Bupa Care Services cares for around 6,100 residents in 122
care homes and 10 Richmond care villages.
-- Bupa Health Services comprises 52 health clinics, and the Cromwell Hospital.
Other businesses
-- We also have associate health insurance businesses in Saudi
Arabia (Bupa Arabia) and India (Niva Bupa) and an interest in
MyClinic in Saudi Arabia.
Bupa Finance plc
(Company Number 2779134)
Condensed Consolidated Half Year Financial Statements
(unaudited)
Six months ended 30 June 2022
Bupa Finance plc
Condensed Consolidated Income Statement
for six months ended 30 June 2022 (unaudited)
For six months For year
For six ended 30 ended 31
months ended June 2021 December
30 June 2022 restated(1) 2021
Note GBPm GBPm GBPm
---------------- ---- ------------------------------ ------------------------------ ------------------------------
Revenues
Gross insurance
premiums 4,780 4,633 9,227
Premiums ceded
to reinsurers (63) (47) (102)
---------------- ---- ------------------------------ ------------------------------ ------------------------------
Net insurance
premiums earned 4,717 4,586 9,125
Care, health and
other customer
contract
revenue 1,893 1,837 3,699
Other revenue 44 34 79
---------------- ---- ------------------------------ ------------------------------ ------------------------------
Total revenues 3 6,654 6,457 12,903
---------------- ---- ------------------------------ ------------------------------ ------------------------------
Claims and
expenses
Insurance claims
incurred (3,766) (3,685) (7,294)
Reinsurers'
share of claims
incurred 42 35 79
---------------- ---- ------------------------------ ------------------------------ ------------------------------
Net insurance
claims incurred (3,724) (3,650) (7,215)
Share of
post-taxation
results
of equity
accounted
investments 27 25 42
Impairment of
goodwill and
intangible
assets - (3) (27)
Other operating
expenses(1) (2,651) (2,542) (5,123)
Other income and
charges 4 (3) 46 49
---------------- ---- ------------------------------ ------------------------------ ------------------------------
Total claims and
expenses (6,351) (6,124) (12,274)
---------------- ---- ------------------------------ ------------------------------ ------------------------------
Profit before
financial
income and
expense 303 333 629
Financial income
and expense
Financial income 5 34 47 97
Financial
expense(1) 5 (82) (88) (185)
Net monetary
loss 1.6 (61) - -
Net impairment
loss on
financial
assets (5) (1) (4)
---------------- ---- ------------------------------ ------------------------------ ------------------------------
Net financial
expense (114) (42) (92)
---------------- ---- ------------------------------ ------------------------------ ------------------------------
Profit before
taxation
expense 189 291 537
Taxation expense 6 (60) (75) (99)
Profit for the
period 129 216 438
---------------- ---- ------------------------------ ------------------------------ ------------------------------
Attributable to:
Shareholder of
Bupa Finance
plc(1) 128 215 435
Non-controlling
interests 1 1 3
---------------- ---- ------------------------------ ------------------------------ ------------------------------
Profit for the
period 129 216 438
---------------- ---- ------------------------------ ------------------------------ ------------------------------
1. Refer to note 1.4 for details of the restatements.
Notes 1-20 form part of these Condensed Consolidated Financial
Statements.
Bupa Finance plc
Condensed Consolidated Statement of Comprehensive Income
for six months ended 30 June 2022 (unaudited)
For six months For year
For six ended 30 ended 31
months ended June 2021 December
30 June 2022 restated(1) 2021
GBPm GBPm GBPm
----------------------- ------------------------------ ----------------------------- ------------------------------
Profit for the
period(1) 129 216 438
----------------------- ------------------------------ ----------------------------- ------------------------------
Other comprehensive
income/(expense)
Items that will not be
reclassified
to the Income Statement
Unrealised gain/(loss)
on revaluation
of property 11 (10) (26)
Remeasurement gain on
pension
schemes - - 4
Taxation credit on
income and
expenses recognised
directly
in other comprehensive
income 1 3 5
Items that may be
reclassified
subsequently to the
Income Statement
Foreign exchange
translation
differences on
goodwill 98 (73) (126)
Other foreign exchange
translation
differences(1) 285 (145) (240)
Net (loss)/gain on
hedge of net
investment in overseas
subsidiary
companies (61) 46 62
Share of other
comprehensive
income of equity
accounted investments (5) 7 6
Change in fair value of
financial
investments through
other comprehensive
income (6) 2 (6)
Realised loss on
disposal of
financial investments
at fair
value through other
comprehensive
income - - 1
Change in cash flow
hedge reserve - (21) (21)
Release of foreign
exchange translation
reserve on closure of
subsidiary 4 - -
Taxation credit on
income and
expenses recognised
directly
in other comprehensive
income 3 - -
----------------------- ------------------------------ ----------------------------- ------------------------------
Total other
comprehensive
income/(expense) 330 (191) (341)
----------------------- ------------------------------ ----------------------------- ------------------------------
Comprehensive income
for the
period 459 25 97
----------------------- ------------------------------ ----------------------------- ------------------------------
Attributable to:
Shareholder of Bupa
Finance plc(1) 458 25 97
Non-controlling
interests 1 - -
----------------------- ------------------------------ ----------------------------- ------------------------------
Comprehensive income
for the
period 459 25 97
----------------------- ------------------------------ ----------------------------- ------------------------------
1. Refer to note 1.4 for details of the restatements.
Notes 1-20 form part of these Condensed Consolidated Financial
Statements.
Bupa Finance plc
Condensed Consolidated Statement of Financial Position
as at 30 June 2022 (unaudited)
For year For six months
For six ended 31 ended 30
months ended December June 2021
30 June 2022 2021 restated(1)
Note GBPm GBPm GBPm
----------------- ---- ------------------------------ ------------------------------ -----------------------------
Assets
Goodwill and
intangible
assets(1) 7 3,606 3,493 3,612
Property, plant
and equipment 8 3,832 3,793 3,869
Investment
property 9 700 666 637
Equity accounted
investments 985 905 869
Post-employment
benefit
net assets 10 2 1 1
Restricted assets 11 129 158 156
Financial
investments 12 3,736 2,911 2,980
Derivative assets 25 41 42
Deferred taxation
assets 167 89 52
Current taxation
assets 16 15 10
Assets arising
from insurance
business 13 2,122 1,374 1,894
Inventories 91 93 111
Trade and other
receivables 788 618 661
Cash and cash
equivalents 14 1,553 1,739 1,596
Assets held for
sale 15 22 38 148
----------------- ---- ------------------------------ ------------------------------ -----------------------------
Total assets 17,774 15,934 16,638
----------------- ---- ------------------------------ ------------------------------ -----------------------------
Liabilities
Subordinated
liabilities 16 (997) (997) (1,248)
Other
interest-bearing
liabilities 16 (824) (822) (1,028)
Lease liabilities (922) (915) (952)
Post-employment
benefit
net liabilities 10 (9) (9) (12)
Provisions
arising from
insurance
contracts 17 (4,407) (3,233) (3,897)
Derivative
liabilities (113) (35) (12)
Provisions for
liabilities
and charges(1) (372) (270) (264)
Deferred taxation
liabilities(1) (185) (171) (172)
Current taxation
liabilities (61) (55) (81)
Other liabilities
arising
from insurance
business (229) (213) (221)
Trade and other
payables (2,155) (2,170) (2,027)
Liabilities
associated with
assets held for
sale 15 (1) (4) (53)
----------------- ---- ------------------------------ ------------------------------ -----------------------------
Total liabilities (10,275) (8,894) (9,967)
----------------- ---- ------------------------------ ------------------------------ -----------------------------
Net assets 7,499 7,040 6,671
----------------- ---- ------------------------------ ------------------------------ -----------------------------
Equity
Share capital 200 200 200
Property
revaluation
reserve 677 655 679
Income and
expenditure
reserve(1) 5,904 5,884 5,668
Foreign exchange
translation
reserve(1) 404 (13) 107
----------------- ---- ------------------------------ ------------------------------ -----------------------------
Equity
attributable to
shareholder of
Bupa Finance
plc 7,185 6,726 6,654
Restricted Tier 1
notes 18 297 297 -
Non-controlling
interests 17 17 17
----------------- ---- ------------------------------ ------------------------------ -----------------------------
Total equity 7,499 7,040 6,671
----------------- ---- ------------------------------ ------------------------------ -----------------------------
1. Refer to note 1.4 for details of the restatements.
Notes 1-20 form part of these Condensed Consolidated Financial
Statements.
Bupa Finance plc
Condensed Consolidated Statement of Cash Flows
for six months ended 30 June 2022 (unaudited)
For six For six months
months ended ended 30 For year
30 June June 2021 ended 31 December
2022 restated(1) 2021
Note GBPm GBPm GBPm
------------------------------- ---- --------------------------- ---------------------------- --------------------------------
Operating activities
Profit before taxation
expense(1) 189 291 537
Adjustments for:
Net financial expense(1) 53 42 92
Net monetary loss 61 - -
Depreciation, amortisation
and impairment(1) 251 236 506
Other non-cash items (38) (78) (128)
Changes in working capital
and provisions:
Increase in provisions and
other liabilities arising from
insurance contracts 1,072 839 238
Increase in assets arising
from insurance business (695) (577) (73)
Funded pension scheme employer
contributions - - (1)
Increase in trade and other
receivables, and other assets (93) (88) (29)
(Decrease)/increase in trade
and other payables, and other
liabilities(1) (29) (63) 21
------------------------------- ---- --------------------------- ---------------------------- --------------------------------
Cash generated from operations 771 602 1,163
------------------------------- ---- --------------------------- ---------------------------- --------------------------------
Income taxation paid (104) (116) (215)
Decrease/(increase) in cash
held in restricted assets 11 29 (7) (9)
------------------------------- ---- --------------------------- ---------------------------- --------------------------------
Net cash generated from
operating
activities 696 479 939
------------------------------- ---- --------------------------- ---------------------------- --------------------------------
Cash flow from investing
activities
Acquisition of subsidiary
companies
and businesses, net of cash
acquired (12) 2 (19)
Investment in equity accounted
investments (8) (12) (14)
Dividends received from
associates 56 34 34
Disposal of subsidiary
companies
and other businesses, net of
cash disposed of (7) 9 104
Divestment of equity accounted
investments - 5 7
Purchase of intangible
assets(1) 7 (41) (31) (88)
Purchase of property, plant
and equipment (71) (62) (193)
Proceeds from sale of property,
plant and equipment 6 2 18
Purchase of investment property 9 (12) (23) (37)
Disposal of investment property 9 1 - -
Purchases of financial
investments,
excluding deposits with credit
institutions(1) (908) (522) (1,070)
Proceeds from sale and
maturities
of financial investments,
excluding
deposits with credit
institutions 471 273 750
Net (investments
into)/withdrawals
from deposits with credit
institutions(1) (242) 104 231
Interest received 30 25 62
------------------------------- ---- --------------------------- ---------------------------- --------------------------------
Net cash used in investing
activities (737) (196) (215)
------------------------------- ---- --------------------------- ---------------------------- --------------------------------
Cash flow from financing
activities
Proceeds from issue of
Restricted
Tier 1 notes - - 297
Payment of Restricted Tier
1 interest 18 (6) - -
Proceeds from issue of
interest-bearing
liabilities and drawdowns on
other borrowings 106 330 391
Repayment of interest-bearing
liabilities and other
borrowings (87) (473) (983)
Principal repayment of lease
liabilities (60) (61) (130)
Repayment of interest on lease
liabilities (22) (24) (47)
Interest paid (48) (45) (83)
(Payments)/receipts on
settlement
of hedging instruments (41) (10) 8
Dividends paid (15) (52) (52)
Dividends paid to
non-controlling
interests (1) (1) (1)
------------------------------- ---- --------------------------- ---------------------------- --------------------------------
Net cash used in financing
activities (174) (336) (600)
------------------------------- ---- --------------------------- ---------------------------- --------------------------------
Net (decrease)/increase in
cash and cash equivalents (215) (53) 124
Cash and cash equivalents at
beginning of period(2) 1,738 1,705 1,705
Effect of exchange rate changes 29 (54) (91)
------------------------------- ---- --------------------------- ---------------------------- --------------------------------
Cash and cash equivalents
at end of period(2) 14 1,552 1,598 1,738
------------------------------- ---- --------------------------- ---------------------------- --------------------------------
1. Refer to note 1.4 for details of the restatements.
2. Includes bank overdrafts of GBP1m (HY 2021: GBP1m; FY 2021:
GBP1m) which are not considered as a component of cash and
cash equivalents within note 14 and cash balances classified
as held for sale of GBPnil (HY 2021: GBP3m; FY 2021: GBPnil).
Notes 1-20 form part of these Condensed Consolidated Financial
Statements.
Bupa Finance plc
Condensed Consolidated Statement of Changes in Equity
for six months ended 30 June 2022 (unaudited)
Total
attributable
Foreign to shareholder
Property Income exchange of Bupa Restricted
Share revaluation and expenditure translation Finance Tier Non-controlling Total
Capital reserve reserve(1) reserve(1) plc 1 notes interests equity
For six months
ended 30 June
2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance as at 1
January 2022 200 655 5,884 (13) 6,726 297 17 7,040
Initial
application
of IAS 29(1) - - (84) 105 21 - - 21
----------------- -------- ---------------- ----------------- --------------- ----------------- ------------ ---------------- ------------
Balance as at
1 January 2022,
as restated 200 655 5,800 92 6,747 297 17 7,061
----------------- -------- ---------------- ----------------- --------------- ----------------- ------------ ---------------- ------------
Profit for the
period - - 128 - 128 - 1 129
Other comprehensive
income/(expense)
Unrealised gain
on revaluation
of property - 11 - - 11 - - 11
Realised
revaluation
profit on
disposal
of property - (2) 2 - - - - -
Foreign exchange
translation
differences
on goodwill - - - 98 98 - - 98
Other foreign
exchange
translation
differences - 12 4 269 285 - - 285
Net loss on hedge
of net
investment
in overseas
subsidiary
companies - - - (61) (61) - - (61)
Share of other
comprehensive
income
of equity
accounted
investments - - (5) - (5) - - (5)
Change in fair
value of
financial
investments
through
other
comprehensive
income - - (6) - (6) - - (6)
Release of
foreign
exchange
translation
reserve on
closure
of subsidiary - - - 4 4 - - 4
Taxation credit
on income and
expense
recognised
directly
in other
comprehensive
income - 1 1 2 4 - - 4
----------------- -------- ---------------- ----------------- --------------- ----------------- ------------ ---------------- ------------
Other
comprehensive
income/(expense)
for the period,
net of taxation - 22 (4) 312 330 - - 330
Total
comprehensive
income for the
period - 22 124 312 458 - 1 459
Payment of
Restricted
Tier 1 coupon,
net of taxation - - (5) - (5) - - (5)
Dividends to
equity
holders of the
company - - (15) - (15) - - (15)
Dividends paid
to
non-controlling
interests - - - - - - (1) (1)
----------------- -------- ---------------- ----------------- --------------- ----------------- ------------ ---------------- ------------
Balance as at
30 June 2022 200 677 5,904 404 7,185 297 17 7,499
----------------- -------- ---------------- ----------------- --------------- ----------------- ------------ ---------------- ------------
1. Refer to note 1.6 for details of the adjustments.
Notes 1-20 form part of these Condensed Consolidated Financial
Statements.
Bupa Finance plc
Condensed Consolidated Statement of Changes in Equity
continued
for six months ended 30 June 2022 (unaudited)
Total
attributable
Cash Foreign to shareholder
Property Income flow exchange of Bupa Restricted
Share revaluation and expenditure hedge translation Finance Tier Non-controlling Total
Capital reserve reserve reserve reserve plc 1 notes interests equity
For year ended
31 December 2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance as at 1
January 2021 200 699 5,498 21 263 6,681 - 18 6,699
Profit for the
year - - 435 - - 435 - 3 438
Other comprehensive
income/(expense)
Unrealised loss
on revaluation
of property - (26) - - - (26) - - (26)
Realised
revaluation
profit on
disposal
of property - (4) 4 - - - - - -
Remeasurement
gain
on pension
schemes - - 4 - - 4 - - 4
Foreign exchange
translation
differences
on goodwill - - - - (126) (126) - - (126)
Other foreign
exchange
translation
differences - (20) (6) - (211) (237) - (3) (240)
Net gain on hedge
of net
investment
in overseas
subsidiary
companies - - - - 62 62 - - 62
Share of other
comprehensive
income
of equity
accounted
investments - - 6 - - 6 - - 6
Change in fair
value of
financial
investments
through
other
comprehensive
income - - (6) - - (6) - - (6)
Realised loss on
disposal of
financial
investments at
fair value
through
other
comprehensive
income - - 1 - - 1 - - 1
Change in cash
flow hedge
reserve - - - (21) - (21) - - (21)
Taxation
credit/(charge)
on income and
expense
recognised
directly
in other
comprehensive
income - 6 - - (1) 5 - - 5
----------------- -------- --------------- --------------- ---------- -------------- ----------------- ----------- --------------- --------
Other
comprehensive
(expense)/income
for the year,
net
of taxation - (44) 3 (21) (276) (338) - (3) (341)
Total
comprehensive
(expense)/income
for the year - (44) 438 (21) (276) 97 - - 97
----------------- -------- --------------- --------------- ---------- -------------- ----------------- ----------- --------------- --------
Issue of
Restricted
Tier 1 notes - - - - - - 297 - 297
Dividends to
equity
holders of the
company - - (52) - - (52) - - (52)
Dividends paid
to
non-controlling
interests - - - - - - - (1) (1)
----------------- -------- --------------- --------------- ---------- -------------- ----------------- ----------- --------------- --------
Balance as at
31 December 2021 200 655 5,884 - (13) 6,726 297 17 7,040
----------------- -------- --------------- --------------- ---------- -------------- ----------------- ----------- --------------- --------
Notes 1-20 form part of these Condensed Consolidated Financial
Statements.
Total
attributable
Cash Foreign to shareholder
Property Income flow exchange of Bupa
Share revaluation and expenditure hedge translation Finance Non-controlling Total
Capital reserve reserve(1) reserve reserve(1) plc interests equity
For six months
ended 30 June
2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance as at 1
January 2021 200 699 5,542 21 266 6,728 18 6,746
Opening balance
adjustments(1) - - (44) - (3) (47) - (47)
----------------- -------- ---------------- ----------------- ---------- --------------- ---------------- -------------------- -------------
Balance as at 1
January 2021, as
restated 200 699 5,498 21 263 6,681 18 6,699
----------------- -------- ---------------- ----------------- ---------- --------------- ---------------- -------------------- -------------
Profit for the
period(1) - - 215 - - 215 1 216
Other comprehensive
income/(expense)
Unrealised loss
on revaluation
of
property - (10) - - - (10) - (10)
Realised
revaluation
profit on
disposal
of property - (1) 1 - - - - -
Foreign exchange
translation
differences
on goodwill - - - - (73) (73) - (73)
Other foreign
exchange
translation
differences(1) - (12) (3) - (129) (144) (1) (145)
Net gain on hedge
of net
investment
in overseas
subsidiary
companies - - - - 46 46 - 46
Share of other
comprehensive
income of equity
accounted
investments - - 7 - - 7 - 7
Change in fair
value
of financial
investments
through other
comprehensive
income - - 2 - - 2 - 2
Change in cash
flow
hedge reserve - - - (21) - (21) - (21)
Taxation credit
on income and
expense
recognised
directly
in other
comprehensive
income - 3 - - - 3 - 3
----------------- -------- ---------------- ----------------- ---------- --------------- ---------------- -------------------- -------------
Other
comprehensive
(expense)/income
for the period,
net of taxation - (20) 7 (21) (156) (190) (1) (191)
Total
comprehensive
(expense)/income
for the period - (20) 222 (21) (156) 25 - 25
Dividends to
equity
holders of the
company - - (52) - - (52) - (52)
Dividends paid to
non-controlling
interests - - - - - - (1) (1)
----------------- -------- ---------------- ----------------- ---------- --------------- ---------------- -------------------- -------------
Balance as at 30
June 2021 200 679 5,668 - 107 6,654 17 6,671
----------------- -------- ---------------- ----------------- ---------- --------------- ---------------- -------------------- -------------
1. Refer to note 1.4 for details of the restatements.
Notes 1-20 form part of these Condensed Consolidated Financial
Statements.
Bupa Finance plc
Notes to the Condensed Consolidated Financial Statements
for six months ended 30 June 2022 (unaudited)
1 Basis of preparation
1.1 Basis of preparation
Bupa Finance plc (the 'Company'), a company incorporated in
England and Wales, together with its subsidiaries (collectively the
'Group') is an international healthcare business, providing health
insurance, treatment in clinics, dental centres and hospitals, and
operating care homes. The immediate and ultimate parent of the
Company is The British United Provident Association Limited (the
'Parent' or 'Bupa' and together with its subsidiaries, the 'Bupa
Group').
The Condensed Consolidated Half Year Financial Statements of the
Company as at and for the six months ended 30 June 2022 comprise
those of the Company and its subsidiary companies.
The interim financial statements have been prepared in
accordance with UK-adopted International Accounting Standard 34
Interim Financial Reporting and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. The interim financial statements should be read
in conjunction with the annual financial statements for the year
ended 31 December 2021, which have been prepared in accordance with
UK-adopted international accounting standards, in conformity with
the requirements of the Companies Act 2006. The interim financial
statements have been prepared on the basis of the accounting
policies set out in the annual financial statements for the year
ended 31 December 2021 and in accordance with the accounting policy
for IAS 29 Financial Reporting in Hyperinflationary Economies
described in note 1.6.
The interim financial statements were approved by the Board of
Directors of Bupa Finance plc on 3 August 2022.
The financial information contained in these interim financial
statements does not constitute statutory accounts of Bupa Finance
plc within the meaning of Section 435 of the Companies Act 2006.
The comparative figures for the financial year ended 31 December
2021 are not the Company's statutory accounts for the financial
year. Those accounts have been reported on by the Company's auditor
and delivered to the Registrar of Companies. The report of the
auditor was (i) unqualified, (ii) did not include a reference to
any matters to which the auditor drew attention by way of emphasis
without qualifying their report, and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
1.2 Going concern
Following a detailed assessment of the Group's going concern
status based on its current position and forecast results, the
Directors have concluded that the Group has adequate resources to
operate for at least the next 12 months from the approval of these
financial statements. This assessment considered forecast and
reasonably possible adverse changes to the Group's regulatory
solvency, liquidity, access to funding and trading profitability
over the next 12 months.
The assessment identified the risks and uncertainties most
likely to impact the Group and considered the impact to the Group's
businesses under a number of reasonably plausible severe scenarios,
such as those reflecting potential economic impacts of the COVID-19
pandemic and those including prolonged levels of heightened
inflation. Under such scenarios, significant short-term reductions
in planned profitability may arise, however, in the absence of a
highly material and improbable stress event, the Group would still
remain within its risk appetites for liquidity and regulatory
solvency. The Group has access to a GBP900m revolving credit
facility (RCF) as described in note 16. The Group expects to remain
compliant with the RCF's covenants under stressed scenarios and may
further draw down on the RCF in order to meet liquidity needs.
Additional management actions would allow downside impacts to be
further mitigated by reducing expenditure, obtaining additional
funding or divesting investments or businesses.
Details of the Group's business activities, together with the
factors likely to affect its future development, performance and
position are set out in the Half Year 2022 Results Announcement.
The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are also described in the
Financial Review of the Half Year 2022 Results Announcement.
1.3 Accounting estimates and judgements
The preparation of financial statements requires the use of
certain accounting estimates and assumptions that affect the
reported assets, liabilities, income and expenses. It also requires
management to exercise judgement in applying the Group's accounting
policies.
The areas involving a higher degree of judgement or complexity,
or where assumptions are significant to the Condensed Consolidated
Financial Statements, are set out below and in more detail in the
related notes.
Area Details Note
---------------- ------------------------------------------------------------ ----
Goodwill and intangible assets are recognised on
acquired businesses based on fair values at the
date of acquisition. Goodwill and intangible assets
with indefinite lives are tested for impairment
on an annual basis, or when there are indicators
of impairment. Other intangible assets are tested
for impairment when there are indicators of impairment.
As at 30 June 2022, all CGUs and intangible assets
were reviewed for indicators of impairment. Impairment
indicators were identified for Bupa Dental Care
UK and Bupa Care Services and a full impairment
test has been performed, the results of which are
included in note 7.
Sources of estimation uncertainty
Impairment tests include a number of sources of
estimation uncertainty as the key assumptions used
when modelling the recoverable amount include estimating
the discount rate, terminal growth rate and the
forecast cash flows. Estimation uncertainties within
these cash flows vary by CGU. For Bupa Dental Care
UK, these specifically include available clinician
hours, fee rates and operating expenses and for
Bupa Care Services these include occupancy rates,
fee rates, staff and agency costs and operating
expenses.
Key estimation uncertainty in the period has been
driven by increases in inflation across Bupa's
key markets. This has primarily impacted the determination
of appropriate discount rates in light of associated
market volatility. In addition there is increased
uncertainty in the underlying cash flow forecasts
driven by this economic uncertainty.
Accounting judgements
Judgement has been applied to determine whether
there is an indication of impairment to intangible
assets and goodwill. In making this judgement,
Goodwill the Group has considered current trading and future
and intangible plans associated with each of the assets in order
assets to assess whether a full impairment test is required. 7
---------------- ------------------------------------------------------------ ----
The Group has a significant portfolio of care home,
hospital and office properties. These are subject
to periodic and at least triennial valuations performed
by external independent valuers, with directors'
valuations performed in intervening years.
Sources of estimation uncertainty
Significant assumptions for freehold properties
are normalised earnings, average occupancy and
capitalisation rates, whereas for investment property
key assumptions are discount and capital growth
rates.
Accounting judgements
In valuing care home property, a judgement is made
on the highest and best use of the property. In
the majority of cases this leads to the property
being valued as part of a group of assets making
up a going-concern business using market-based
assumptions. The business is valued on a fair maintainable
trade basis with the fair value thus calculated
being allocated to plant and equipment and bed
licences where applicable at net book value (as
Property a proxy for fair value), with the residual value
valuations being allocated to property. 8,9
---------------- ------------------------------------------------------------ ----
Estimates included in the provisions arising from
insurance contracts include expected claims payments
and expenses required to settle existing insurance
contract obligations.
A deferred claims provision continues to be held
within the outstanding claims provision in respect
of the health insurance business in Australia,
where the Australian prudential regulator (APRA)
has mandated the need to provide for the rebound
of claims following the ongoing COVID-19 disruption,
triggering a constructive obligation for the Group
to pay claims in relation to the disrupted business.
The estimated cost of claims expected to rebound
after the reporting date has been calculated as
a proportion (the deferral factor) of the observed
shortfall in incurred claims, compared with pre-COVID-19
expectations. This has been recognised on a best
estimate basis, together with an allowance for
claims handling costs and an additional risk margin.
Sources of estimation uncertainty
The key assumptions used in the calculation of
the outstanding claims provision include claims
development, margin of prudence, claims costs inflation,
medical trends and seasonality. In respect of the
deferred claims provision, significant assumptions
include forecasting the insurance claims that remain
deferred at the reporting date following periods
of significant COVID-19 disruption and the percentage
Claims of those claims which are likely to rebound in
provisioning future. 17
---------------- ------------------------------------------------------------ ----
The unearned premium provision includes a return
of premium provision in respect of the UK Private
Medical Insurance (PMI) business. In April 2020,
Bupa Insurance Limited made a commitment to pass
back to customers any exceptional financial benefits
experienced by the UK PMI business that ultimately
arise as a result of COVID-19. The provision has
been calculated based on estimating the ultimate
net reduction in claims costs attributable to COVID-19,
adjusted to take into account incremental costs
and profit impacts attributable to COVID-19, and
deducting the estimated costs of deferred claims
expected to rebound and COVID-19 related claims
inflation.
Sources of estimation uncertainty
Significant assumptions for the return of premium
provision include forecasting the insurance claims
that remain deferred at the reporting date following
COVID-19 disruption, including the timing and amount
of claims that are expected to rebound and in calculating
the exceptional financial benefits that are expected
Unearned to be experienced by the business, including the
premium identification of incremental costs and profit
provisioning impacts attributable to COVID-19. 17
---------------- ------------------------------------------------------------ ----
1.4 Restatements
Following the changes to published 30 June 2021 figures detailed
in (a) to (d) below, the Group has consistently applied its
accounting policies to all periods presented in these Condensed
Consolidated Financial Statements.
Full details of the impact of the below restatements to opening
balances as at 1 January 2021 were shown in the 2021 Group Annual
Report and Accounts.
30 June 2021 As published Restatements As restated
GBPm GBPm GBPm
------------------------ ----------------------------- ------------------------------ -----------------------------
Total claims and
expenses (6,121) (3) (6,124)
Net financial expense (41) (1) (42)
Total impact on profit
for the
period (4)
Goodwill and intangible
assets 3,626 (14) 3,612
Provisions for
liabilities and
charges (210) (54) (264)
Deferred taxation
liabilities (190) 18 (172)
------------------------ ----------------------------- ------------------------------ -----------------------------
Total impact on net
assets (50)
Income and expenditure
reserve 5,716 (48) 5,668
Foreign exchange
translation
reserve 109 (2) 107
------------------------ ----------------------------- ------------------------------ -----------------------------
Total impact on equity (50)
------------------------ ----------------------------- ------------------------------ -----------------------------
(a) Underpayment of employee entitlements
During the second half of the 2021 financial year, the Group was
able to quantify historical underpayments of employee entitlements
affecting some current and former employees, following an extensive
proactive pay compliance review carried out in Australia and New
Zealand. Comparative periods have been restated for the error
resulting in the impacts shown in the table below.
30 June
2021
GBPm
--------------------------------------------- ------------------------------
Opening income and expenditure reserve (33)
Other operating expenses (3)
Financial expense (note 5) (1)
Total impact on profit for the period (4)
--------------------------------------------- ------------------------------
Closing income and expenditure reserve (37)
--------------------------------------------- ------------------------------
Opening foreign exchange translation reserve (3)
--------------------------------------------- ------------------------------
Foreign exchange movement in the period 1
--------------------------------------------- ------------------------------
Closing foreign exchange translation reserve (2)
--------------------------------------------- ------------------------------
Total impact on equity (39)
--------------------------------------------- ------------------------------
30 June
2021
GBPm
--------------------------------------- -----------------------------
Provisions for liabilities and charges (54)
Deferred taxation liabilities 15
--------------------------------------- -----------------------------
Total impact on net assets (39)
--------------------------------------- -----------------------------
As at 30 June 2022, the Group is holding a provision of GBP57m
(FY 2021: GBP62m) in respect of future remediation payments.
Remediation payments are expected to be completed by the end of
2022.
(b) Market Unit restructure
With effect from 1 July 2021, the Group announced an update to
the organisational structure transferring Bupa Hong Kong from Other
businesses into the Australia and New Zealand Market Unit to form
Bupa Asia Pacific. Half Year 2021 results by operating segment have
been restated to reflect this change. The amounts related to Bupa
Hong Kong which have been restated between segments are shown
below.
Bupa Hong
Kong
30 June
2021
GBPm
------------------------------------------------- ------------------------------
Gross insurance premiums 178
Premiums ceded to reinsurers (2)
Internal reinsurance (25)
------------------------------------------------- ------------------------------
Net insurance premiums earned 151
Care, health and other customer contract revenue 79
Other revenue -
------------------------------------------------- ------------------------------
Total revenues for reportable segments 230
------------------------------------------------- ------------------------------
Bupa Hong
Kong
30 June
2021
GBPm
---------------------------------------- ------------------------------
Underlying loss for reportable segments (2)
---------------------------------------- ------------------------------
The restructure had no impact on the Condensed Consolidated
Statement of Financial Position or Condensed Consolidated Income
Statement.
(c) IFRS Interpretations Committee decision Configuration or
Customisation Costs in a Cloud Computing Arrangement (IAS 38
Intangible Assets)
In April 2021, the IFRS Interpretations Committee (IFRS IC)
published its final agenda decision Configuration or Customisation
Costs in a Cloud Computing Arrangement (IAS 38 Intangible Assets).
This agenda decision considered how an entity should account for
configuration and customisation costs incurred in implementing a
Software as a Service (SaaS) arrangement. The IFRS IC concluded
that such costs should be expensed unless the criteria for
recognising a separate asset are met. The Group reviewed the
historic capitalisation of SaaS costs which led to certain assets
being derecognised where capitalisation was judged to have been
non-compliant with the new guidance. The impact of this agenda
decision was recognised on a fully retrospective basis within the
Consolidated Financial Statements for the year ended 31 December
2021 and the resulting impacts on the Condensed Consolidated Half
Year Financial Statements for 2021 are shown below. This
comparative period has been restated to reflect the change in
accounting policy resulting from the new guidance.
30 June
2021
GBPm
---------------------------------------- ------------------------------
Opening income and expenditure reserve (11)
Other operating expenses - depreciation 3
Other operating expenses - other (3)
Total impact on profit for the period -
---------------------------------------- ------------------------------
Closing income and expenditure reserve (11)
---------------------------------------- ------------------------------
Total impact on equity (11)
---------------------------------------- ------------------------------
30 June
2021
GBPm
------------------------------- -----------------------------
Goodwill and intangible assets (14)
Deferred taxation liabilities 3
------------------------------- -----------------------------
Total impact on net assets (11)
------------------------------- -----------------------------
(d) Financial asset classification
Following an internal review of financial asset classification
in the prior year, GBP137m of assets have been restated from
deposits with credit institutions at amortised cost to corporate
debt securities and secured loans at amortised cost as at 30 June
2021. This had no impact on the Condensed Consolidated Statement of
Financial Position.
1.5 New and amended accounting standards
1.5.1 New and amended standards adopted by the Group
A number of amended standards became applicable for the current
reporting period. The Group did not have to change its accounting
policies or make retrospective adjustments as a result of adopting
these amended standards.
1.5.2 Impact of standards issued but not yet applied by the Group
IFRS 17 Insurance Contracts
IFRS 17 Insurance Contracts was issued in May 2017 as a
replacement for IFRS 4 Insurance Contracts, with amendments to IFRS
17 issued in June 2020 and December 2021. The final standard will
be effective for annual periods beginning on or after 1 January
2023.
IFRS 17 requires a current measurement model where estimates are
remeasured each reporting period. Under the general measurement
model, contracts are measured using the building blocks of
discounted probability-weighted cash flows, an explicit risk
adjustment, and a contractual service margin (CSM) representing the
unearned profit of the contract which is recognised as revenue over
the coverage period. However, an optional, simplified premium
allocation approach, similar in nature to the Group's existing
measurement basis, is permitted for short-duration contracts.
The detailed application of IFRS 17 is currently being evaluated
by the Group. The majority of the Group's insurance contracts have
a duration of one year or less. The Group expects to apply the
simplified premium allocation approach for such contracts and to
recognise insurance acquisition cash flows as incurred. A
significant change in the measurement basis is not anticipated,
however the Group continues to assess any recognition impacts on
implementation of the new standard. The presentation and disclosure
requirements of IFRS 17 will, however, differ considerably compared
to the current approach.
IFRS Interpretations Committee decision Demand Deposits with
Restrictions on Use arising from a Contract with a Third Party (IAS
7 Statement of Cash Flows)
In March 2022, the IFRS IC published its final agenda decision
Demand Deposits with Restrictions on Use arising from a Contract
with a Third Party (IAS 7 Statement of Cash Flows). This agenda
decision considered whether an entity should include a demand
deposit as a component of cash and cash equivalents in its
statements of cash flows and financial position when the demand
deposit is subject to contractual restrictions on use agreed with a
third party.
The IFRS IC concluded restrictions on the use of a demand
deposit arising from a contract with a third party do not result in
the deposit no longer being cash unless those restrictions result
in the deposit no longer meeting the definition of cash. Such a
deposit would be presented as part of cash and cash equivalents on
the statement of financial position, although could be presented
separately if relevant to an understanding of an entity's financial
position.
The impact of this agenda decision is currently being evaluated
by the Group. This evaluation is expected to be completed, and any
impact of the agenda decision recorded, during the second half of
2022.
1.6 Foreign exchange
The following significant exchange rates applied during the
period:
Average rate Closing rate
30 June 31 December 30 June 30 June 31 December 30 June
2022 2021 2021 2022 2021 2021
Australian
dollar 1.80 1.83 1.80 1.77 1.86 1.84
Brazilian
real 6.59 7.42 7.48 6.37 7.54 6.88
Chilean
peso 1,071.81 1,045.64 1,000.12 1,117.88 1,152.93 1,013.71
Danish
krone 8.83 8.65 8.57 8.64 8.84 8.66
Euro 1.19 1.16 1.15 1.16 1.19 1.16
Hong Kong
dollar 10.16 10.69 10.78 9.55 10.55 10.72
Mexican
peso 26.32 27.90 28.02 24.54 27.74 27.52
New Zealand
dollar 1.96 1.95 1.94 1.95 1.98 1.98
Polish
zloty 5.51 5.31 5.23 5.46 5.46 5.27
Saudi riyal 4.87 5.16 5.21 4.57 5.08 5.18
Turkish
lira 19.25 12.22 10.98 20.32 17.97 12.02
US dollar 1.30 1.38 1.39 1.22 1.35 1.38
----------- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Türkiye is now a hyperinflationary economy and IAS 29 Financial
Reporting in Hyperinflationary Economies is required to be applied
from June 2022 onwards. As a consequence, the results and balances
for the Group's Turkish operations have been adjusted for changes
in the general purchasing power of the Turkish lira. In order to
make this adjustment the Group refers to the CPI index published by
the Turkish Statistical Institute. The value of CPI at 30 June 2022
was 977.88 and the movement in CPI for the period ended 30 June
2022 was 290.93, an increase of 42.4%. A loss of GBP61m arising
from the devaluation of net monetary assets has been recognised
within net financial expense in the Condensed Consolidated Income
Statement. This is partially offset by the impact of indexing
amounts in the Condensed Consolidated Income Statement for the
application of IAS 29, with the net impact reducing profit before
tax by GBP38m for the period.
All Turkish lira amounts are translated to the Group's
presentation currency of sterling, using the closing exchange rate
in effect on 30 June 2022 of 20.32. The impact of this adjustment
is recorded within other foreign exchange translation differences
in the Condensed Consolidated Statement of Comprehensive Income and
within the foreign exchange translation reserve in the Condensed
Consolidated Statement of Financial Position. The Group recognises
the remaining exchange difference arising on consolidation within
other foreign exchange translation differences through other
comprehensive income in the foreign exchange translation
reserve.
Prior periods have not been restated for the introduction of
hyperinflation. The impact as at 1 January 2022 has been recorded
as an opening balance adjustment in the current period. This
includes an adjustment of GBP(84)m to the income and expenditure
reserve in respect of adjusting balances for changes in the general
purchasing power of the Turkish lira to that date, and adjustments
to the foreign exchange translation reserve of GBP105m for the
impact of translating the opening balances using the closing 31
December 2021 exchange rates, in addition to the remaining exchange
differences arising on consolidation. The split of the opening
balance adjustment is consistent with how the current period
impacts are reported and will be applied consistently in future
periods. Of the opening balance adjustment, GBP25m is in respect of
goodwill and intangible assets and is shown in note 7. The net
impact of applying hyperinflationary accounting has been excluded
from underlying profit and included within realised and unrealised
FX gains/losses as this is how the Group measures performance of
the business.
2 Operating segments
The organisational structure of the Group is managed through
three Market Units based on geographic locations and customers. The
Group announced an update to the organisational structure in the
second half of 2021, with the incorporation of Bupa Hong Kong into
the previous Australia and New Zealand Market Unit to form Bupa
Asia Pacific. The three Market Units are now Bupa Asia Pacific;
Europe and Latin America; and Bupa Global and UK. Management
monitors the operating results of the Market Units separately to
assess performance and make decisions about the allocation of
resources. Bupa China and the Group's associate investments, Bupa
Arabia and Niva Bupa are reported within Other businesses. The
segmental disclosures below are reported consistently with the way
the business is managed and reported internally.
Comparative information has been restated to reflect the change
in organisational structure. Refer to note 1.4b for further
details.
Reportable Segments Service and Products
------------------- -------------------------------------------------------
Bupa Asia Pacific Bupa Health Insurance: Health insurance, international
health cover in Australia.
Bupa Health Services: Health provision services
relating to dental, optical, audiology and medical
assessments and therapy.
Bupa Villages and Aged Care Australia: Nursing,
residential, respite care and residential villages.
Bupa Villages and Aged Care New Zealand: Nursing,
residential, respite care and residential villages.
Bupa Hong Kong: Domestic health insurance, primary
healthcare and day care clinics including diagnostics.
------------------- -------------------------------------------------------
Europe and Latin Sanitas Seguros: Health insurance and related
America products in Spain.
Sanitas Dental: Insurance and dental services
through clinics and third-party networks in Spain.
Sanitas Hospitales and New Services: Management
and operation of hospitals and health clinics
in Spain.
Sanitas Mayores: Nursing, residential and respite
care in care homes and day centres in Spain.
LuxMed: Medical subscriptions, health insurance,
and the management and operation of diagnostics,
health clinics and hospitals in Poland.
Bupa Acıbadem Sigorta: Domestic health
insurance in Türkiye.
Bupa Chile: Domestic health insurance and the
management and operation of health clinics and
hospitals in Chile.
Care Plus: Domestic health insurance in Brazil.
Bupa Mexico: Domestic health insurance in Mexico.
Bupa Global Latin America: International health
insurance.
------------------- -------------------------------------------------------
Bupa Global Bupa UK Insurance: Domestic health insurance,
and UK and administration services for Bupa health trusts.
Bupa Dental Care UK: Dental services and related
products.
Bupa Care Services: Nursing, residential, respite
care and care villages.
Bupa Health Services: Clinical services, health
assessment related products and management and
operation of a private hospital.
Bupa Global: International health insurance
to individuals, small businesses and corporate
customers.
Associate: Highway to Health (United States
of America) (operating as GeoBlue).
------------------- -------------------------------------------------------
Other businesses Bupa China: Clinical services.
Associates: Bupa Arabia (Kingdom of Saudi Arabia)
and Niva Bupa (India): Health insurance.
------------------- -------------------------------------------------------
A key performance measure of operating segments utilised by the
Group is underlying profit. This measurement basis distinguishes
underlying profit from other constituents of the IFRS reported
profit before taxation not directly related to the trading
performance of the business. Updates have been made to underlying
profit in 2022 due to the recent Australian Government announcement
on the deregulation of bed licences and as a result of Türkiye
becoming a hyperinflationary economy in 2022.
The Group holds GBP69m (HY 2021: GBP101m; FY 2021: GBP83m) of
bed licences within Bupa Villages and Aged Care Australia.
Following the Australian Government's announcement of the
deregulation of bed licences from 1 July 2024, the Group reviewed
the amortisation term and updated them from having an indefinite
useful life to being amortised over the period to 1 July 2024. Bed
licence amortisation has been removed from underlying profit as it
is not considered to relate directly to the trading performance of
the business.
The impacts of applying IAS 29 have also been removed from
underlying profit as this is how the Group measures the performance
of the business. These impacts have been recognised within the
realised and unrealised foreign exchange gains/losses category
below.
Underlying profit
The following items are excluded from underlying profit:
- Impairment of intangible assets and goodwill arising on
business combinations - these impairments are considered
to be one-off and not reflective of the in-year trading
performance of the business.
- Net gains/losses on disposal of businesses and transaction
costs on business combinations - gains/losses on disposal
of businesses that are material and one-off in nature to
the reportable segment are not considered part of the continuing
business. Transaction costs that relate to material acquisitions
or disposals are not related to the ongoing trading performance
of the business.
- Net property revaluation gains/losses - short-term fluctuations
which would distort underlying trading performance. This
includes unrealised gains or losses on investment properties,
deficit on revaluations and property impairment losses.
- Realised and unrealised foreign exchange gains/losses -
fluctuations outside of management control, which would
distort underlying trading performance. This includes the
net impact of applying hyperinflationary accounting, as
discussed above.
- Gains/losses on return-seeking assets, net of hedging -
fluctuations on investments that are not considered to be
directly related to underlying trading performance.
- Amortisation of bed licences - Following the Australian
Government's announcement of the deregulation of bed licences
from 1 July 2024, their amortisation term was reviewed and
updated from having an indefinite useful life to amortising
over the period to 1 July 2024. The impact of this is not
considered reflective of the trading performance of the
business, as discussed above.
- Other Market Unit/Group non-underlying items - includes
items that are considered material to the reportable segment
or Group and are not reflective of ongoing trading performance.
This includes items such as restructuring costs and profit
or loss amounts related to changes to strategic investments.
The total underlying profit of the reportable segments is
reconciled below to the profit before taxation expense in the
Condensed Consolidated Income Statement.
Europe Bupa
Bupa and Latin Global Other
Asia Pacific America and UK businesses Total
For six months
ended
30 June 2022 GBPm GBPm GBPm GBPm GBPm
--------------- --------------------- --------------------- --------------------- --------------------- ---------------------
(i) Revenues
Gross insurance
premiums 2,075 1,437 1,268 - 4,780
Premiums ceded
to reinsurers (3) (13) (47) - (63)
Internal
reinsurance (31) - 31 - -
--------------- --------------------- --------------------- --------------------- --------------------- ---------------------
Net insurance
premiums
earned 2,041 1,424 1,252 - 4,717
Care, health
and other
customer
contract
revenue 620 709 564 - 1,893
Other revenue 30 5 6 3 44
Total revenues
for reportable
segments 2,691 2,138 1,822 3 6,654
--------------- --------------------- --------------------- --------------------- --------------------- ---------------------
Consolidated
total revenues 6,654
--------------- --------------------- --------------------- --------------------- --------------------- ---------------------
(ii) Segmental
result
Underlying
profit for
reportable
segments 131 57 74 30 292
Central
expenses and
net
interest
margin (12)
---------------------
Underlying
profit for
reportable
segments 280
Non-underlying
items:
Net gain/(loss)
on disposal
of businesses
and
transaction
costs on
business
combinations 4 (2) - (4) (2)
Net property
revaluation
gain/(loss) 12 - (1) - 11
Realised and
unrealised
FX
(loss)/gain(1) - (38) 6 - (32)
Amortisation of
bed licences (17) - - - (17)
Other Market
Unit
non-underlying
items(2) - (10) - - (10)
Loss on
return-seeking
assets, net of
hedging (41)
---------------------
Total
non-underlying
items (91)
--------------- --------------------- --------------------- --------------------- --------------------- ---------------------
Consolidated
profit before
taxation
expense 189
--------------- --------------------- --------------------- --------------------- --------------------- ---------------------
1. Includes decrease in profit before tax of GBP38m in Bupa
Acıbadem Sigorta arising from the effect of IAS 29
Financial Reporting in Hyperinflationary Economies.
2. Includes GBP10m in ELA relating to restructuring costs in
Chile.
Bupa Asia Europe Other
Pacific and Latin Bupa Global businesses Total
restated(1),(2) America and UK restated(1) restated(2)
For six months
ended 30
June 2021 GBPm GBPm GBPm GBPm GBPm
--------------- --------------------- --------------------- -------------------- --------------------- ---------------------
(i) Revenues
Gross insurance
premiums 2,146 1,341 1,146 - 4,633
Premiums ceded
to reinsurers (2) (9) (36) - (47)
Internal
reinsurance (25) (1) 26 - -
--------------- --------------------- --------------------- -------------------- --------------------- ---------------------
Net insurance
premiums
earned 2,119 1,331 1,136 - 4,586
Care, health
and other
customer
contract
revenue 637 681 519 - 1,837
Other revenue 23 4 5 2 34
Total revenues
for reportable
segments 2,779 2,016 1,660 2 6,457
--------------- --------------------- --------------------- -------------------- --------------------- ---------------------
Consolidated
total revenues 6,457
--------------- --------------------- --------------------- -------------------- --------------------- ---------------------
(ii) Segmental
result
Underlying
profit for
reportable
segments 139 79 16 29 263
Central
expenses and
net
interest
margin (29)
---------------------
Underlying
profit for
reportable
segments 234
Non-underlying
items:
Impairments of
intangible
assets and
goodwill
arising
on business
combinations - (1) - - (1)
Net gain on
disposal of
businesses and
transaction
costs on
business
combinations 7 - 2 - 9
Net property
revaluation
gain 7 - - - 7
Realised and
unrealised
FX gain - 1 8 - 9
Other Market
Unit
non-underlying
items(3) - (3) 34 (1) 30
Gain on
return-seeking
assets, net of
hedging 3
---------------------
Total
non-underlying
items 57
--------------- --------------------- --------------------- -------------------- --------------------- ---------------------
Consolidated
profit before
taxation
expense 291
--------------- --------------------- --------------------- -------------------- --------------------- ---------------------
1. Refer to note 1.4b for details of the restatement.
2. Refer to note 1.4a for details of the restatement.
3. GBP31m within the Bupa Global and UK segment includes a
GBP39m gain on the acquisition of the membership and business
of CS Healthcare and restructuring costs.
Europe
Bupa Asia and Latin Bupa Global Other
Pacific America and UK businesses Total
For year ended
31 December
2021 GBPm GBPm GBPm GBPm GBPm
--------------- --------------------- --------------------- --------------------- -------------------- --------------------
(i) Revenues
Gross insurance
premiums 4,241 2,663 2,323 - 9,227
Premiums ceded
to reinsurers (5) (22) (75) - (102)
Internal
reinsurance (53) - 53 - -
--------------- --------------------- --------------------- --------------------- -------------------- --------------------
Net insurance
premiums
earned 4,183 2,641 2,301 - 9,125
Care, health
and other
customer
contract
revenue 1,264 1,354 1,081 - 3,699
Other revenue 51 9 14 5 79
Total revenues
for reportable
segments 5,498 4,004 3,396 5 12,903
--------------- --------------------- --------------------- --------------------- -------------------- --------------------
Consolidated
total revenues 12,903
--------------- --------------------- --------------------- --------------------- -------------------- --------------------
(ii) Segmental
result
Underlying
profit for
reportable
segments 249 185 78 45 557
Central
expenses and
net
interest
margin (48)
--------------------
Underlying
profit for
reportable
segments 509
Non-underlying
items:
Impairments of
intangible
assets and
goodwill
arising
on business
combinations (18) - - - (18)
Net gain on
disposal of
businesses and
transaction
costs on
business
combinations 8 3 2 - 13
Net property
revaluation
gain/(loss) 17 - (1) - 16
Realised and
unrealised
FX (loss)/gain - (3) 7 1 5
Other Market
Unit
non-underlying
items(1) - (9) 32 - 23
Group
non-underlying
items(2) (14)
Gain on
return-seeking
assets, net of
hedging 3
--------------------
Total
non-underlying
items 28
--------------- --------------------- --------------------- --------------------- -------------------- --------------------
Consolidated
profit before
taxation
expense 537
--------------- --------------------- --------------------- --------------------- -------------------- --------------------
1. GBP22m within the Bupa Global and UK segment includes a
GBP40m net gain on the acquisition of the membership and
business of CS Healthcare in 2021 (initially GBP39m, adjusted
upon finalisation of the acquisition balance sheet in the
second half of 2021) and restructuring costs.
2. Includes GBP18m loss recognised following the early redemption
of GBP250m of unguaranteed subordinated bonds during the
year.
3 Revenues
Revenue has been analysed at Business Unit level reflecting the
nature of services provided by each geography that is reported
internally to management.
Care,
health
and other
customer Net insurance
contract premiums Other Total
revenue earned revenue revenues
For six months ended GBPm GBPm GBPm GBPm
30 June
2022
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Bupa Health Insurance 2 1,880 2 1,884
Bupa Health Services 306 - - 306
Bupa Villages and Aged
Care
Australia 153 - 19 172
Bupa Villages and Aged
Care
New Zealand 72 - 8 80
Bupa Hong Kong 87 161 1 249
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Bupa Asia Pacific 620 2,041 30 2,691
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Sanitas Seguros 5 636 1 642
Sanitas Dental 62 36 2 100
Sanitas Hospitales and
New
Services 94 - 1 95
Sanitas Mayores 70 - - 70
LuxMed 266 8 - 274
Bupa Acıbadem
Sigorta - 112 1 113
Bupa Chile 198 342 - 540
Care Plus 2 122 - 124
Bupa Mexico 5 68 - 73
Bupa Global Latin
America 7 100 - 107
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Europe and Latin
America 709 1,424 5 2,138
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Bupa UK Insurance 10 872 2 884
Bupa Dental Care UK 243 - - 243
Bupa Care Services 212 - - 212
Bupa Health Services 99 - 1 100
Bupa Global - 380 3 383
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Bupa Global and UK 564 1,252 6 1,822
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Other - - 3 3
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Other businesses - - 3 3
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Consolidated total
revenues 1,893 4,717 44 6,654
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Care, health
and other
customer Net insurance
contract premiums
revenue earned Other revenue Total revenues
restated(1) restated(1) restated(1) restated(1)
For six months ended
30 June
2021 GBPm GBPm GBPm GBPm
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Bupa Health Insurance 5 1,968 - 1,973
Bupa Health Services 324 - - 324
Bupa Villages and Aged
Care
Australia 158 - 16 174
Bupa Villages and Aged
Care
New Zealand 71 - 7 78
Bupa Hong Kong(1) 79 151 - 230
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Bupa Asia Pacific(1) 637 2,119 23 2,779
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Sanitas Seguros 5 616 - 621
Sanitas Dental 57 35 3 95
Sanitas Hospitales and
New
Services 120 - - 120
Sanitas Mayores 64 - - 64
LuxMed 229 6 - 235
Bupa Acıbadem
Sigorta - 91 - 91
Bupa Chile 195 349 1 545
Care Plus 1 85 - 86
Bupa Mexico 4 7 - 11
Bupa Global Latin
America 6 142 - 148
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Europe and Latin
America 681 1,331 4 2,016
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Bupa UK Insurance 9 773 1 783
Bupa Dental Care UK 243 - - 243
Bupa Care Services 192 - - 192
Bupa Health Services 75 - 1 76
Bupa Global - 363 3 366
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Bupa Global and UK 519 1,136 5 1,660
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Other - - 2 2
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Other businesses(1) - - 2 2
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Consolidated total
revenues 1,837 4,586 34 6,457
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
1. Refer to note 1.4b for details of the restatement.
Care, health
and other
customer Net insurance
contract premiums
revenue earned Other revenue Total revenues
For year ended 31
December
2021 GBPm GBPm GBPm GBPm
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Bupa Health Insurance 8 3,876 1 3,885
Bupa Health Services 626 - 1 627
Bupa Villages and Aged
Care
Australia 317 - 34 351
Bupa Villages and Aged
Care
New Zealand 146 - 14 160
Bupa Hong Kong 167 307 1 475
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Bupa Asia Pacific 1,264 4,183 51 5,498
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Sanitas Seguros 8 1,228 2 1,238
Sanitas Dental 110 70 3 183
Sanitas Hospitales and
New
Services 221 - - 221
Sanitas Mayores 130 - - 130
LuxMed 470 13 1 484
Bupa Acıbadem
Sigorta - 166 - 166
Bupa Chile 392 674 2 1,068
Care Plus 3 178 - 181
Bupa Mexico 8 46 - 54
Bupa Global Latin
America 12 266 1 279
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Europe and Latin
America 1,354 2,641 9 4,004
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Bupa UK Insurance 18 1,576 4 1,598
Bupa Dental Care UK 493 - - 493
Bupa Care Services 401 - - 401
Bupa Health Services 168 - 1 169
Bupa Global 1 725 9 735
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Bupa Global and UK 1,081 2,301 14 3,396
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Other - - 5 5
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Other businesses - - 5 5
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Consolidated total
revenues 3,699 9,125 79 12,903
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
4 Other income and charges
For year
For six For six months ended 31
months ended ended 30 December
30 June 2022 June 2021 2021
GBPm GBPm GBPm
----------------------- ------------------------------ ------------------------------ -----------------------------
Gain on acquisition of
businesses(1) - 41 42
Net (loss)/gain on
disposal and
restructuring of
businesses (2) 9 13
Deficit on revaluation
of property (1) (4) (10)
Net gain on disposal of
property,
plant and equipment - - 4
----------------------- ------------------------------ ------------------------------ -----------------------------
Total other income and
charges (3) 46 49
----------------------- ------------------------------ ------------------------------ -----------------------------
1. Gain on acquisition of the membership and business of CS
Healthcare which was recognised gross of related transaction
costs of GBP2m.
5 Financial income and expense
Financial income
For year
For six For six months ended 31
months ended ended 30 December
30 June 2022 June 2021 2021
GBPm GBPm GBPm
----------------------- ----------------------------- ------------------------------ ------------------------------
Interest income:
Investments at fair
value through
profit or loss 26 20 42
Investments at fair
value through
other comprehensive
income 1 1 12
Investments at
amortised cost 17 10 18
Net realised
gains/(losses):
Net realised gain on
investments
at fair value through
profit
or loss 8 2 3
Net realised
gain/(loss) on
financial
investments at fair
value through
other comprehensive
income 1 4 (1)
Net movement in fair
value:
Investments at fair
value through
profit or loss (46) 2 -
Investment property 12 11 27
Net foreign exchange
translation
gain/(loss) 15 (3) (4)
----------------------- ----------------------------- ------------------------------ ------------------------------
Total financial income 34 47 97
----------------------- ----------------------------- ------------------------------ ------------------------------
Included within financial income is a net loss, after hedging,
on the Group's return-seeking asset portfolio of GBP41m (HY 2021:
net gain of GBP3m; FY 2021: net gain of GBP3m).
Financial expense
For six months For year
For six ended 30 ended 31
months ended June 2021 December
30 June 2022 restated(1) 2021
GBPm GBPm GBPm
---------------------------- ---------------------------- ---------------------------- ----------------------------
Interest expense on
financial
liabilities at amortised
cost 42 51 92
Finance charges in respect
of
leases and restoration
provisions 23 24 48
Other financial expenses(1) 17 13 45
---------------------------- ---------------------------- ---------------------------- ----------------------------
Total financial expenses 82 88 185
---------------------------- ---------------------------- ---------------------------- ----------------------------
1. Refer to note 1.4a for details of the restatement.
Other financial expenses include GBP10m (HY 2021: GBP10m; FY
2021: GBP23m) of imputed financial expenses in relation to
interest-free refundable accommodation deposits received by the
Group in respect of payment for aged care units in Bupa Villages
and Aged Care Australia.
6 Taxation expense
The Group's effective taxation rate for the period was 32% (HY
2021: 25%; FY 2021: 18%), which is higher than the current UK
corporation taxation rate of 19%. This is mainly due to profits
arising in jurisdictions with a higher rate of corporation taxation
than the UK, irrecoverable overseas taxation on group dividend
income and the impact of non-deductible IAS 29 adjustments applied
as a result of hyperinflation in Türkiye.
7 Goodwill and intangible assets
Computer Customer
Goodwill software Brands/Trademarks relationships Other(2) Total
At 30 June
2022 GBPm GBPm GBPm GBPm GBPm GBPm
------------- -------------------- -------------------- -------------------- ----------------------- ---------------- --------------------
Net book
value at
beginning of
period 2,449 291 133 482 138 3,493
Initial
application
of IAS 29(1) 17 - 1 - 7 25
Assets
arising on
business
combinations 3 2 - 1 - 6
Additions - 41 - - - 41
Disposals (1) (1) - - - (2)
Amortisation
for
period - (36) (4) (27) (21) (88)
Foreign
exchange 98 10 5 8 10 131
Net book
value at
end of
period 2,566 307 135 464 134 3,606
------------- -------------------- -------------------- -------------------- ----------------------- ---------------- --------------------
Computer Customer
Goodwill software Brands/Trademarks relationships Other(2) Total
At 31
December 2021 GBPm GBPm GBPm GBPm GBPm GBPm
------------- -------------------- -------------------- -------------------- ----------------------- ----------------- -------------------
Net book
value at
beginning of
period 2,642 297 171 515 181 3,806
Assets
arising on
business
combinations 28 - 1 29 4 62
Additions - 88 - - - 88
Disposals (52) (3) (11) - (4) (70)
Amortisation
for
period - (69) (9) (56) (15) (149)
Impairment
loss (6) (9) - - (12) (27)
Transfer to
assets
held for
sale (17) - - - - (17)
Other (20) 1 - 1 (1) (19)
Foreign
exchange (126) (14) (19) (7) (15) (181)
Net book
value at
end of
period 2,449 291 133 482 138 3,493
------------- -------------------- -------------------- -------------------- ----------------------- ----------------- -------------------
Computer Customer
Goodwill software(3) Brands/Trademarks relationships Other(2) Total
At 30 June
2021 GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------------------- -------------------- -------------------- ----------------------- ----------------- --------------------
Net book value
at
beginning of
period 2,642 311 171 515 181 3,820
Opening
balance
adjustment(3) - (14) - - - (14)
Assets arising
on
business
combinations 5 - - 28 4 37
Additions(3) - 31 - - - 31
Disposals (1) - - - (2) (3)
Amortisation
for
period(3) - (33) (5) (28) (3) (69)
Impairment
loss (1) (2) - - - (3)
Transfer to
assets
held for sale (53) - (11) - (4) (68)
Other (20) - - - - (20)
Foreign
exchange (73) (9) (6) (3) (8) (99)
Net book value
at
end of period
(restated) 2,499 284 149 512 168 3,612
-------------- -------------------- -------------------- -------------------- ----------------------- ----------------- --------------------
1. Refer to note 1.6 for details of the adjustments.
2. Predominantly comprises bed licences, distribution networks
and licences to operate care homes.
3. Refer to note 1.4c for details of the restatement.
Intangible assets of GBP3,606m (HY 2021 (restated): GBP3,612m;
FY 2021: GBP3,493m) includes GBP733m (HY 2021: GBP829m; FY 2021:
GBP753m) attributable to other intangible assets arising on
business combinations, comprising customer relationships, brands
and trademarks and other in the above table.
Computer software assets of GBP307m (HY 2021 (restated):
GBP284m; FY 2021: GBP291m) includes GBP219m (HY 2021: GBP236m; FY
2021: GBP233m) attributable to capitalised internal development
costs. GBP36m of costs (HY 2021 (restated): GBP26m; FY 2021:
GBP72m) were capitalised in the period.
Goodwill by CGU is as follows:
At 30 June At 31 December At 30 June
2022 2021 2021
GBPm GBPm GBPm
-------------- --------------------------------- --------------------------------- ---------------------------------
Bupa Asia
Pacific
Bupa Australia
Health
Insurance 867 821 830
Bupa Health
Services
Australia 303 288 308
Bupa Villages
and Aged Care
Australia 104 99 105
Hong Kong 127 115 114
Europe and
Latin America
Bupa Chile 135 130 148
LuxMed 249 246 233
Sanitas
Seguros 47 46 46
Sanitas
Mayores 21 21 21
Bupa
Acıbadem
Sigorta 50 24 35
Care Plus 29 26 27
Other 6 5 4
Bupa Global
and UK
Bupa Care
Services 90 90 90
Bupa Dental
Care UK 467 467 467
Bupa Global 68 68 68
Other 3 3 3
-------------- --------------------------------- --------------------------------- ---------------------------------
Total 2,566 2,449 2,499
-------------- --------------------------------- --------------------------------- ---------------------------------
Impairment testing
Goodwill and intangible assets with an indefinite useful life
are tested at least annually for impairment in accordance with IAS
36 Impairment of Assets and IAS 38 Intangible Assets. As at 30 June
2022, all CGUs and intangible assets were reviewed for indicators
of impairment. Where impairment indicators were identified an
impairment test was carried out by comparing the net carrying value
with the recoverable amount, using value in use calculations and
based on the latest cash flow forecasts for CGUs as at 30 June
2022. Bupa Dental Care UK and Bupa Care Services both showed
indications of impairment and a full goodwill test was
performed.
Key judgements in performing this testing are the assumptions
underlying the five-year cash flow forecasts of the businesses. For
aged care, key drivers are occupancy rates, fee rates, staff and
agency costs and operating expenses. For provision businesses the
cash flows are driven by available clinician hours, fee rates and
operating expenses.
The tests have not indicated that an impairment of goodwill is
required for either of the CGUs. The headroom for both CGUs have
reduced in the period having been impacted by increases in the
discount rate in the period, with Bupa Dental Care UK additionally
continuing to experience the sector wide challenges with the
recruitment and retention of clinicians, impacting future forecast
earnings. Sensitivities have been provided below showing the impact
of a reasonably probable change to the discount rate, terminal grow
rate or cash flows.
Reduction
Reduction in headroom Reduction
in headroom from 0.5% in headroom
from 0.5% reduction from 10%
Terminal increase in terminal reduction
Discount growth in discount growth in cash
Headroom rate rate rate rate flows
GBPm % % GBPm GBPm GBPm
----------- ------------------- -------- -------- -------------------- -------------------- --------------------
Bupa Dental
Care
UK 40 8.2 2.1 (88) (76) (84)
Bupa Care
Services 18 7.3 2.1 (108) (94) (102)
----------- ------------------- -------- -------- -------------------- -------------------- --------------------
The risk of a future impairment within one or more of the CGUs
with limited headroom (Bupa Dental Care UK, Bupa Care Services,
Bupa Villages and Aged Care Australia and Bupa Chile) is expected
to increase if rising inflation and wider global economic
volatility continues in future periods. In addition, Bupa Dental
Care UK continues to be highly sensitive to achieving growth in
clinician hours over the forecast period. The cash flows assume
that an additional 10% of average clinician hours are added over
the forecast period - this level of growth rate, assuming all other
assumptions remain unchanged, is required to support the current
carrying value.
Bupa Chile is exposed to heightened regulatory and wider
political uncertainty, and is particularly sensitive to the local
regulatory approval of a triennial insurance premium rate rise,
which is assumed effective from October 2022. This rate rise is
consistent with the local legal rules of the Isapre market, however
due to heightened risk in the context of a referendum on a new
constitution in September 2022, should this unexpectedly not be
approved, or should the level of judicial challenge to this or
other annual rate rises materially increase, this could trigger an
impairment in future periods.
8 Property, plant and equipment
At 30 June At 31 December At 30 June
2022 2021 2021
GBPm GBPm GBPm
---------------------- ------------------------------ ------------------------------ ------------------------------
Net book value at
beginning of
period 3,793 4,115 4,115
Assets arising on
business combinations 4 21 4
Additions 100 245 84
Transfer to assets
held for sale (14) (20) (67)
Disposals (9) (68) (4)
Revaluations 10 (36) (14)
Remeasurements 24 42 13
Depreciation charge
for the period (163) (324) (163)
Impairment loss - (6) (1)
Other - (2) (2)
Foreign exchange 87 (174) (96)
---------------------- ------------------------------ ------------------------------ ------------------------------
Net book value at end
of period 3,832 3,793 3,869
---------------------- ------------------------------ ------------------------------ ------------------------------
Property, plant and equipment comprise the physical assets or
rights to use leased assets, which are utilised by the Group to
carry out business activities and generate revenues and profits.
Most of the assets held relate to care homes, hospital properties,
office buildings and equipment. Leased right-of-use assets relate
primarily to property leases.
Freehold properties are initially measured at cost and
subsequently at revalued amount less accumulated depreciation and
impairment losses. These properties are subject to periodic and at
least triennial valuations performed by external independent
valuers. Care homes, clinics and hospital freehold property
valuations are either determined based on a capitalisation of
earnings approach (i.e. each facility's normalised earnings are
divided by an appropriate capitalisation rate to determine a value
in use) or based on discounted future cash flow projections where
the discount rate is determined according to the time value of
money, the level of risk of the industry and the corresponding
premium risk. All other properties are valued by external valuers,
based on observable market values of similar properties.
No external valuations were performed as at 30 June 2022. A
review of the underlying assumptions underpinning the property
valuations as at 30 June 2022 resulted in uplifts of GBP10m in
respect of owned property (HY 2021: write-downs of GBP14m, FY 2021:
write-downs of GBP36m).
Right-of-use assets in relation to property leases, are carried
at historical cost less depreciation. An assessment for indicators
of impairment of right-of-use assets is made at the CGU level of
the business concerned, based on value in use. If impairment
testing is required, key assumptions include future projected cash
flows and discount rates.
No impairments have been recognised as at 30 June 2022 (HY 2021:
GBP1m; FY 2021: GBP6m).
9 Investment property
At 30 June At 31 December At 30 June
2022 2021 2021
GBPm GBPm GBPm
------------------------ ------------------------------ ----------------------------- -----------------------------
At beginning of period 666 627 627
Additions 12 37 23
Disposals (1) - -
Increase in fair value 12 27 11
Reclassification from
property,
plant and equipment - 1 1
Foreign exchange 11 (26) (25)
------------------------ ------------------------------ ----------------------------- -----------------------------
At end of period 700 666 637
------------------------ ------------------------------ ----------------------------- -----------------------------
Investment properties are physical assets that are not occupied
by the Group and are leased to third parties to generate rental
income.
Investment properties are initially measured at cost and
subsequently at fair value, determined individually, on a basis
appropriate to the purpose for which the property is intended and
with regard to recent market transactions for similar properties in
the same location. Where no active market exists, as is the case
for retirement villages where each village is unique due to
building configuration and location, these properties are valued
using discounted cash flow projections based on reliable estimates
of future cash flows. Investment property is revalued externally at
least annually, with any gain or loss arising from a change in fair
value recognised in the Condensed Consolidated Income Statement
within financial income and expense.
The carrying value of investment properties primarily consists
of the Group's portfolio of retirement villages in Australia and
New Zealand of GBP689m (HY 2021: GBP630m, FY 2021: GBP654m). These
were valued by management using internally prepared discounted cash
flow projections, supported by the terms of any existing lease and
other contracts. Discount rates are used to reflect current market
assessments of the uncertainty in the amount or timing of the cash
flows. During the period an independent valuation of the New
Zealand portfolio was performed by Jones Lang LaSalle, and this
valuation, also based on a discounted cash flow model, was in line
with management's valuation.
Significant assumptions used in the valuation at 30 June 2022
include:
Australia and New Zealand
--------------------------------- -------------
Discount rate 13.0% - 15.5%
Capital growth rate 0.0% - 3.5%
Turnover in apartments and villas 4 - 6 years
--------------------------------- -------------
The sensitivity analysis below considers the impact on the
period end valuation of Level 3 investment properties and is based
on a reasonably possible change in assumption while holding all
other assumptions constant. In practice, changes in assumptions may
be correlated.
0.5% absolute 0.5% absolute
Australia and New Zealand increase decrease
------------------------- --------------- ---------------
Discount rate GBP12m decrease GBP13m increase
Capital growth rate GBP17m increase GBP15m decrease
------------------------- --------------- ---------------
10 Post-employment benefits
The Group operates several funded defined benefit and defined
contribution pension schemes for the benefit of employees and
Directors.
The defined benefit pension schemes provide benefits based on
final pensionable salary. The Group's net obligation in respect of
the defined benefit pension is calculated separately for each
scheme and represents the present value of the defined benefit
obligation less the fair value of scheme assets. The discount rate
used is the yield at the balance sheet date on high-quality
corporate bonds denominated in the currency in which the benefit
will be paid. When the calculation results in a benefit to the
Group, the recognised asset is limited to the present value of any
future refunds from the scheme or reductions in future
contributions to the scheme.
Amount recognised in the Condensed Consolidated Income
Statement
The total amount charged to the Condensed Consolidated Income
Statement amounted to GBPnil (HY 2021 and FY 2021: GBPnil).
Amount recognised directly in other comprehensive income
The amounts credited directly to equity are:
For six months For year
For six ended 30 ended 31
months ended June 2021 December
30 June 2022 2021
GBPm GBPm GBPm
Gain arising from
changes to
financial assumptions - - (3)
Gain arising from
changes to
experience assumptions - - (1)
Total remeasurement
gains credited
directly to equity - - (4)
------------------------ ----------------------------- ----------------------------- ------------------------------
Assets and liabilities of schemes
The assets and liabilities in respect of the defined benefit
funded pension schemes are as follows:
At 30 June At 31 December At 30 June
2022 2021 2021
GBPm GBPm GBPm
----------------------- ------------------------------ ------------------------------ -----------------------------
Present value of funded
obligations (82) (82) (87)
Fair value of scheme
assets 75 74 76
----------------------- ------------------------------ ------------------------------ -----------------------------
Net recognised
liabilities (7) (8) (11)
----------------------- ------------------------------ ------------------------------ -----------------------------
Represented on the Condensed Consolidated
Statement of Financial Position:
Net liabilities (9) (9) (12)
Net assets 2 1 1
----------------------- ------------------------------ ------------------------------ -----------------------------
Net recognised
liabilities (7) (8) (11)
----------------------- ------------------------------ ------------------------------ -----------------------------
11 Restricted assets
At 30 June At 31 December At 30 June
2022 2021 2021
GBPm GBPm GBPm
---------------------------- ---------------------------- ---------------------------- ----------------------------
Non-current restricted
assets 46 45 48
Current restricted assets 83 113 108
---------------------------- ---------------------------- ---------------------------- ----------------------------
Total restricted assets 129 158 156
---------------------------- ---------------------------- ---------------------------- ----------------------------
Restricted assets are amounts held in respect of specific
obligations and potential liabilities and may be used only to
discharge those obligations and potential liabilities if and when
they crystallise. The non-current restricted assets balance of
GBP46m (HY 2021: GBP48m; FY 2021: GBP45m) consists of cash deposits
held to secure a charge over certain unfunded pension scheme
obligations (held in the Parent company). Included in current
restricted assets is GBP77m (HY 2021: GBP106m; FY 2021: GBP111m) in
respect of claims funds held on behalf of corporate customers.
12 Financial investments
The Group generates cash from its underwriting, trading and
nancing activities and invests the surplus cash in nancial
investments. These include government bonds, corporate bonds,
pooled investments funds and deposits with credit institutions.
Classification
All financial investments are initially recognised at fair
value, which includes transaction costs for financial investments
not classified at fair value through profit or loss. Financial
investments are recorded using trade date accounting on initial
recognition.
Financial investments are derecognised when the rights to
receive cash flows from the financial investments have expired or
where the Group has transferred substantially all risks and rewards
of ownership.
The Group has classified its financial investments into the
following categories: at fair value through profit or loss (FVTPL),
at fair value through other comprehensive income (FVOCI) and at
amortised cost.
Impairment
Under IFRS 9, impairment provisions for expected credit losses
(ECL) are recognised for financial investments measured at
amortised cost and FVOCI. An allowance for either a 12-month or
lifetime ECL is required, depending on whether there has been a
significant increase in credit risk since initial recognition.
However, an assumption can be made that the credit risk on a
financial instrument has not increased significantly since initial
recognition if the financial instrument is determined to have low
credit risk at the reporting date. The Group applies a 12-month ECL
allowance to all assets, as no significant increases in credit risk
since initial recognition have been identified.
The measurement of ECL reflects a probability-weighted outcome,
the time value of money and the best available forward-looking
information.
Financial investments are analysed as follows:
At 30 June At 31 December
2022 2021 At 30 June 2021
---------------- ------------------------------------ ------------------------------------ ------------------------------------
Carrying
Carrying Fair Carrying value Fair value
value value value Fair value restated(1) restated(1)
GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Fair value
through
profit or loss
Corporate debt
securities
and secured
loans 307 307 334 334 345 345
Government debt
securities 45 45 45 45 40 40
Pooled
investment
funds 463 463 386 386 391 391
Deposits with
credit
institutions 7 7 - - 1 1
Other loans 7 7 7 7 8 8
Equities 14 14 13 13 11 11
Fair value
through
other
comprehensive
income
Corporate debt
securities
and secured
loans 49 49 66 66 90 90
Government debt
securities 30 30 30 30 36 36
Amortised cost
Corporate debt
securities
and secured
loans(1) 1,130 1,127 774 776 782 787
Government debt
securities 342 344 211 214 99 101
Deposits with
credit
institutions(1) 1,342 1,339 1,044 1,045 1,177 1,179
Other loans - - 1 1 - -
---------------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Total financial
investments 3,736 3,732 2,911 2,917 2,980 2,989
---------------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Non-current 845 842 831 833 865 870
Current 2,891 2,890 2,080 2,084 2,115 2,119
---------------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
1. Refer to note 1.4d for details of the restatement.
Fair value of financial investments
Fair value is a market-based measurement of assets based on
observable market transactions, where market information might be
available. The objective of a fair value measurement is to estimate
the price at which an orderly transaction to sell the asset or to
transfer the asset would take place between market participants at
the measurement date under current market conditions.
The fair values of quoted investments in active markets are
based on current bid prices. The fair values of unlisted securities
and quoted investments for which there is no active market are
established by using valuation techniques supported by market
transactions and observable market data provided by independent
third parties. These may include reference to the current fair
value of other investments that are substantially the same and
discounted cash flow analysis. Financial investments carried at
fair value are measured using different valuation inputs
categorised into a three-level hierarchy. The different levels have
been defined by reference to the lowest level input that is
significant to the fair value measurement, as follows:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities;
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from
prices); and
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
An analysis of financial investment fair values by hierarchy
level is as follows:
Level 1 Level 2 Level 3 Total
GBPm GBPm GBPm GBPm
-------------- --------------------------- --------------------------- --------------------------- ---------------------------
At 30 June
2022
Fair value
through profit
or loss
Corporate debt
securities
and secured
loans 26 280 1 307
Government
debt
securities 27 18 - 45
Pooled
investment
funds 115 326 22 463
Deposits with
credit
institutions 7 - - 7
Other loans - - 7 7
Equities - - 14 14
Fair value
through other
comprehensive
income
Corporate debt
securities
and secured
loans 45 4 - 49
Government
debt
securities 30 - - 30
Amortised cost
Corporate debt
securities
and secured
loans 527 600 - 1,127
Government
debt
securities 171 173 - 344
Deposits with
credit
institutions - 1,339 - 1,339
Total
financial
investments 948 2,740 44 3,732
-------------- --------------------------- --------------------------- --------------------------- ---------------------------
Level 1 Level 2 Level 3 Total
GBPm GBPm GBPm GBPm
---------------- --------------------------- --------------------------- --------------------------- ---------------------------
At 31 December
2021
Fair value
through profit
or loss
Corporate debt
securities
and secured
loans 36 297 1 334
Government debt
securities 27 18 - 45
Pooled
investment
funds 96 277 13 386
Deposits with
credit
institutions - - - -
Other loans - - 7 7
Equities - - 13 13
Fair value
through other
comprehensive
income
Corporate debt
securities
and secured
loans 63 3 - 66
Government debt
securities 30 - - 30
Amortised cost
Corporate debt
securities
and secured
loans 523 253 - 776
Government debt
securities 109 105 - 214
Deposits with
credit
institutions - 1,045 - 1,045
Other loans - 1 - 1
---------------- --------------------------- --------------------------- --------------------------- ---------------------------
Total financial
investments 884 1,999 34 2,917
---------------- --------------------------- --------------------------- --------------------------- ---------------------------
Level 2 Total
Level 1 restated(1) Level 3 restated(1)
GBPm GBPm GBPm GBPm
---------------- --------------------------- --------------------------- --------------------------- ---------------------------
At 30 June 2021
Fair value
through profit
or loss
Corporate debt
securities
and secured
loans 39 305 1 345
Government debt
securities 22 18 - 40
Pooled
investment
funds 94 288 9 391
Deposits with
credit
institutions 1 - - 1
Other loans - - 8 8
Equities - - 11 11
Fair value
through other
comprehensive
income
Corporate debt
securities
and secured
loans 90 - - 90
Government debt
securities 36 - - 36
Amortised cost
Corporate debt
securities
and secured
loans(1) 541 246 - 787
Government debt
securities 59 42 - 101
Deposits with
credit
institutions(1) - 1,179 - 1,179
Total financial
investments 882 2,078 29 2,989
---------------- --------------------------- --------------------------- --------------------------- ---------------------------
1. Refer to note 1.4d for details of the restatement.
Transfers between fair value hierarchy levels
The Group's policy is to determine whether transfers have
occurred between fair value hierarchy levels at the end of a
reporting period. Classification is re-assessed based on the lowest
level input that is significant to the fair value measurement as a
whole.
There were no transfers between fair value hierarchy levels in
the period, (HY 2021: GBP113m; FY 2021: GBP48m of government debt
securities and corporate debt securities and secured loans were
transferred from Level 1 to Level 2 following a review of the level
of market activity and readily available quoted prices in those
investments and HY 2021: GBP5m; FY 2021: GBP13m transfers from
Level 2 to Level 1).
The Group currently holds Level 3 financial investments
totalling GBP44m (HY 2021: GBP29m; FY 2021: GBP34m). The majority
of Level 3 investments are unlisted equities and convertible notes
valued at the recent subscription value and conversion price, which
are deemed to be unobservable inputs. Reasonably possible changes
to the valuation assumptions applied could result in a change in
fair value of plus or minus GBP2m.
The table below shows movement in the Level 3 assets measured at
fair value:
At 30 June At 31 December At 30 June
2022 2021 2021
GBPm GBPm GBPm
---------------------- ------------------------------ ------------------------------ ------------------------------
Balance at beginning
of period 34 28 28
Additions 3 2 1
Disposals (1) - -
Net increase in fair
value(1) 7 4 -
Transfer between
levels - 1 1
Foreign exchange 1 (1) (1)
---------------------- ------------------------------ ------------------------------ ------------------------------
Balance at end of
period 44 34 29
---------------------- ------------------------------ ------------------------------ ------------------------------
1. Net increases in fair value are recognised in the Condensed
Consolidated Income Statement in financial income.
Transfers into Level 3 financial assets reflected changes in the
availability of observable inputs used in the valuation of those
assets.
13 Assets arising from insurance business
At 30 June At 31 December At 30 June
2022 2021 2021
GBPm GBPm GBPm
-------------------------- ----------------------------- ----------------------------- ----------------------------
Insurance debtors 1,782 1,116 1,591
Reinsurers' share of
insurance
provisions 74 33 58
Deferred acquisition costs 186 143 162
Medicare rebate 71 73 68
Risk Equalisation Special
Account
recoveries 9 9 15
-------------------------- ----------------------------- ----------------------------- ----------------------------
Total assets arising from
insurance
business 2,122 1,374 1,894
-------------------------- ----------------------------- ----------------------------- ----------------------------
Non-current 5 7 10
Current 2,117 1,367 1,884
-------------------------- ----------------------------- ----------------------------- ----------------------------
Due to the nature of the Group's insurance business and the
timing of renewals, half year balances are higher than year
end.
14 Cash and cash equivalents
At 30 June At 31 December At 30 June
2022 2021 2021
GBPm GBPm GBPm
---------------------------- ---------------------------- ---------------------------- ----------------------------
Cash at bank and in hand 1,256 1,247 1,201
Short-term deposits 297 492 395
---------------------------- ---------------------------- ---------------------------- ----------------------------
Total cash and cash
equivalents 1,553 1,739 1,596
---------------------------- ---------------------------- ---------------------------- ----------------------------
Cash and cash equivalents comprise cash balances, call deposits
and other short-term highly liquid investments (including money
market funds) with original maturities of three months or less,
which are subject to an insignificant risk of change in value.
Bank overdrafts of GBP1m (HY 2021: GBP1m; FY 2021: GBP1m) that
are repayable on demand are reported within other interest-bearing
liabilities (note 16) in the Condensed Consolidated Statement of
Financial Position, although these are considered to be a component
of cash and cash equivalents for the purpose of the Condensed
Consolidated Statement of Cash Flows.
15 Assets and liabilities held for sale
At 30 June At 31 December At 30 June
2022 2021 2021
GBPm GBPm GBPm
---------------------- ------------------------------ ------------------------------ ------------------------------
Assets held for sale
Goodwill and
intangible assets - 17 68
Property, plant and
equipment 21 20 69
Investment property 1 - -
Inventories - - 6
Trade and other
receivables - 1 2
Cash and cash
equivalents - - 3
---------------------- ------------------------------ ------------------------------ ------------------------------
Total assets
classified as held
for sale 22 38 148
---------------------- ------------------------------ ------------------------------ ------------------------------
Liabilities associated
with
assets held for sale
Lease liabilities - (2) (10)
Derivative liabilities - - (18)
Deferred taxation
liabilities - - (4)
Provisions for
liabilities and
charges (1) (1) -
Trade and other
payables - (1) (21)
Total liabilities
classified
as held for sale (1) (4) (53)
---------------------- ------------------------------ ------------------------------ ------------------------------
Net assets classified
as held
for sale 21 34 95
---------------------- ------------------------------ ------------------------------ ------------------------------
Net assets held for sale as at 30 June 2022 comprise a number of
care homes within Bupa Villages and Aged Care Australia and Bupa
Villages and Aged Care New Zealand, as well as an office within
Care Plus in Brazil. Net assets held for sale at 31 December 2021
comprised the Dental Corporation New Zealand business, Dental
Corporation Australia's 'Dental Lounge' business and a number of
care homes and assets within Bupa Villages and Aged Care Australia.
As at 30 June 2021, net assets held for sale primarily comprised
care homes in Sanitas Mayores, Ginemed, a provision business in
Spain, along with care homes and assets within Bupa Villages and
Aged Care Australia.
16 Borrowings
At 30 June At 31 December At 30 June
2022 2021 2021
GBPm GBPm GBPm
------------------------ ----------------------------- ----------------------------- ------------------------------
Subordinated liabilities
Subordinated
unguaranteed bonds 997 997 1,248
------------------------ ----------------------------- ----------------------------- ------------------------------
Total subordinated
liabilities 997 997 1,248
------------------------ ----------------------------- ----------------------------- ------------------------------
Other interest-bearing
liabilities
Senior unsecured bonds 599 642 645
Fair value adjustment in
respect
of hedged interest rate
risk (41) (16) (2)
Bank loans and
overdrafts 266 196 385
------------------------ ----------------------------- ----------------------------- ------------------------------
Total other
interest-bearing
liabilities 824 822 1,028
------------------------ ----------------------------- ----------------------------- ------------------------------
Total borrowings 1,821 1,819 2,276
------------------------ ----------------------------- ----------------------------- ------------------------------
Non-current 1,305 1,623 1,896
Current 516 196 380
------------------------ ----------------------------- ----------------------------- ------------------------------
Other interest-bearing liabilities
During the period Bupa Chile redeemed GBP47m of inflation-linked
senior unsecured bonds, originally due to mature on 30 June
2033.
The Group maintains a GBP900m revolving credit facility in order
to meet liquidity needs which has a maturity of December 2026 with
two, one-year extension options. This facility was entered into in
December 2021 and replaced an GBP800m revolving credit facility and
a separate GBP40m bilateral facility, that were previously held. At
30 June 2022 the facility was drawn down by GBP230m (FY 2021:
GBP150m). During 2021, the Group put in place a EUR30m bank
facility in Spain, originally maturing in May 2022 which was
extended to June 2023 in the period. This remains fully undrawn as
at 30 June 2022 (HY 2021: fully undrawn; FY 2021: fully
undrawn).
Fair value of financial liabilities
The fair value of a financial liability is defined as the amount
for which a financial liability could be exchanged in an
arm's-length transaction between informed and willing parties. Fair
values of subordinated liabilities and senior unsecured bonds are
calculated based on quoted prices. The fair values of quoted
liabilities in active markets are based on current offer prices.
The fair values of financial liabilities for which there is no
active market are established using valuation techniques. These may
include reference to the current fair value of other instruments
that are substantially the same and discounted cash flow
analysis.
Financial liabilities are categorised into a three-level
hierarchy. A description of the different levels is detailed in
note 12.
An analysis of borrowings by fair value classification is as
follows:
At 31 December
At 30 June 2022 2021 At 30 June 2021
--------------------------------------- ----------------------------------------- ------------------------------------------
Level Level Level Level Level Level
1 2 Total 1 2 Total 1 2 Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------- ----------- ------------- ----------- ------------ ---------------- --------- ------------ --------------- -----------
Subordinated
liabilities 942 - 942 1,104 - 1,104 1,399 - 1,399
Senior
unsecured
bonds 565 - 565 608 44 652 617 47 664
Bank loans
and
overdrafts - 266 266 - 196 196 - 385 385
------------- ----------- ------------- ----------- ------------ ---------------- --------- ------------ --------------- -----------
Total fair
value 1,507 266 1,773 1,712 240 1,952 2,016 432 2,448
------------- ----------- ------------- ----------- ------------ ---------------- --------- ------------ --------------- -----------
The Group does not have any Level 3 financial liabilities.
17 Provisions arising from insurance contracts
At 31 December
At 30 June 2022 2021 At 30 June 2021
-------------------------------------------- -------------------------------------------- --------------------------------------------
Gross Re-insurance Net Gross Re-insurance Net Gross Re-insurance Net
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------------- -------------- ------------- ------------- -------------- ------------- ------------- -------------- -------------
General
insurance
business
Provisions
for unearned
premiums 3,054 (63) 2,991 2,104 (24) 2,080 2,712 (50) 2,662
Provisions
for claims 1,352 (11) 1,341 1,093 (9) 1,084 1,150 (8) 1,142
Long-term
business
Life insurance
contract
liabilities(1) 1 - 1 36 - 36 35 - 35
--------------- ------------- -------------- ------------- ------------- -------------- ------------- ------------- -------------- -------------
Total insurance
provisions 4,407 (74) 4,333 3,233 (33) 3,200 3,897 (58) 3,839
--------------- ------------- -------------- ------------- ------------- -------------- ------------- ------------- -------------- -------------
1. The decrease in the period is due to the sale of the portfolio
of life insurance in Bupa Global Latin America, as described
in note 19.
Provision for unearned premiums
The provision for unearned premiums primarily represents
premiums written that relate to periods of risk in future
accounting periods. It is released to the Condensed Consolidated
Income Statement on a straight-line basis, which is not materially
different from a calculation based on the pattern of incidence of
risk.
In circumstances where a return of premium is due to
policyholders, a provision for a return of premium is treated as an
adjustment to the initial premium and is established within the
provision for unearned premiums, reducing gross premium income. A
provision was established in 2020 in respect of Bupa Insurance
Limited making a commitment to pass back to eligible customers any
exceptional financial benefits experienced by the UK PMI business
that ultimately arise as a result of COVID-19. At 30 June 2022, the
return of premium provision held is GBP60m (HY 2021 GBP40m; FY
2021: GBP71m). The net reduction in the provision of GBP11m
reflects a decrease in the best estimate of the exceptional
financial benefit expected to be returned to eligible customers due
to a higher rebound of claims and the closure of the provision to
future accruals from 31 December 2021.
Provision is also made for unexpired risks when unearned
premiums, net of associated acquisition costs, are insufficient to
meet expected claims and administrative expenses. This is performed
at a segment level for the Group's insurance entities. The expected
cash flows are calculated having regard only to contracts
commencing prior to or at the balance sheet date. At 30 June 2022,
an unexpired risk provision of GBP9m has been recognised (HY 2021:
GBP9m; FY 2021: GBP22m).
Provision for claims
The gross provision for claims represents the estimated
liability arising from claims episodes in current and preceding
financial years which have not yet given rise to claims paid. A
claims episode is an insured medical service that the Group has an
obligation to fund which could be consultation fees, diagnostic
investigations, hospitalisation or treatment costs. The provision
includes an allowance for claims management and handling expenses.
The gross provision for claims also includes a deferred claims
provision for claims episodes that have not taken place by the
reporting date where the Group has a constructive obligation to
fund deferred medical services, due to regulatory or other public
commitments following periods of severe service disruption, as has
been the case with COVID-19.
The gross provision for claims across the Group is set in line
with Bupa's Claims Reserving standards, at a level to achieve an
appropriate probability of sufficiency and is estimated based on
current information and the ultimate liability may vary as a result
of subsequent information and events. In setting the provisions for
claims outstanding, a best estimate is determined on an
undiscounted basis and then a margin of prudence is added such that
there is confidence that future claims will be met from the
provisions.
A deferred claims provision of GBP231m has been recognised as at
30 June 2022 (HY 2021: GBP180m; FY 2021: GBP163m) in respect of the
health insurance business in Australia, where the Australian
prudential regulator (APRA) has mandated the need to provide for
the rebound of claims following the ongoing COVID-19 disruption,
creating a constructive obligation for the Group to pay claims in
relation to the disrupted business. The estimated cost of claims
expected to rebound after the reporting date has been calculated as
a proportion (the deferral factor) of the observed shortfall in
incurred claims, compared with pre-COVID-19 expectations. This has
been recognised on a best estimate basis, together with an
allowance for claims handling costs and an additional risk margin.
During the period there has been a further increase in the
provision of GBP181m due to an increase in the best estimate
reflecting the continued disruption to the supply of local health
provision from the COVID-19 Omicron variant. This is partly offset
by a GBP122m release relating to the exclusion of claims deferred
up until June 2021, as they are no longer being expected to
rebound. Related future claims experience may differ significantly
from these estimates. The Australian health insurance business has
committed to not profit from COVID-19, and therefore is seeking to
return amounts to their customers through give back and rate
deferral initiatives.
18 Restricted Tier 1 (RT1) notes
On 24 September 2021, the Company issued GBP300m of RT1 notes
with a fixed coupon of 4.000% paid semi-annually in arrears.
Transaction costs of GBP3m were recognised in respect of the issue.
The total coupon paid during the period was GBP6m (HY 2021: GBPnil;
FY 2021: GBPnil).
The RT1 notes are perpetual with no fixed maturity or redemption
date. The notes have a first call date of 24 March 2032 and
interest is payable at the sole and absolute discretion of the
Company, with cancelled interest providing no rights to the holder
of the notes nor being considered a default. The RT1 notes are
therefore treated as equity. The notes are convertible to share
capital of the Company on the occurrence of certain trigger
events.
19 Business combinations and disposals
There have been no material acquisitions in the six-month period
ended 30 June 2022.
During the period, the Group sold its portfolio of life
insurance in Bupa Global Latin America to a third party, realising
a net loss on disposal of GBP2m. Other minor disposals in the
period included dental businesses in New Zealand and care homes in
Bupa Villages and Aged Care Australia.
20 Commitments and contingencies
Capital commitments
Capital expenditure for the Group contracted at 30 June 2022 but
for which no provision has been made in the financial statements
amounted to GBP54m (HY 2021: GBP108m; FY 2021: GBP68m), primarily
due to aged care facility and retirement village project
commitments in Australia and New Zealand and care homes in the
UK.
Contingent assets and contingent liabilities
The Group currently has no contingent assets.
The Group has contingent liabilities arising in the ordinary
course of business and in relation to a limited number of historic
business disposals. These include losses which might arise from
litigation, consumer matters, other disputes, regulatory compliance
(including data protection) and interpretation of law (including
employment law and tax law). It is not considered that the ultimate
outcome of any contingent liabilities will have a significant
adverse impact on the financial condition of the Group.
Bupa Finance plc
Statement of Directors' responsibilities for six months ended 30
June 2022
We confirm that to the best of our knowledge:
-- The condensed set of financial statements have been prepared in accordance with UK-adopted
International Accounting Standard 34 Interim Financial Reporting and the Disclosure Guidance
and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
-- The interim management report includes a fair review of the information voluntarily provided
in accordance with the requirements of:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of financial statements; and a description of
the principal risks and uncertainties for the remaining six months
of the financial year.
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
Group during that period; and any changes in the related party
transactions described in the last annual report that could do
so.
The Directors of Bupa Finance plc are listed in the Directors'
Report for the year ended 31 December 2021. There have been no
changes in Directors since the publication of the Company's Annual
Report and Accounts for the year ended 31 December 2021.
By order of the Board
James Lenton Gareth Roberts
Director Director
3 August 2022
Independent review report to Bupa Finance plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Bupa Finance plc's condensed consolidated
interim financial statements (the "interim financial statements")
in the Condensed Consolidated Half Year Financial Statements of
Bupa Finance plc for the 6 month period ended 30 June 2022 (the
"period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority as if the company
were required to comply with these rules.
The interim financial statements comprise:
-- the Condensed Consolidated Statement of Financial Position as at 30 June 2022;
-- the Condensed Consolidated Income Statement for the period then ended;
-- the Condensed Consolidated Statement of Comprehensive Income for the period then ended;
-- the Condensed Consolidated Statement of Cash Flows for the period then ended;
-- the Condensed Consolidated Statement of Changes in Equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Condensed
Consolidated Half Year Financial Statements of Bupa Finance plc
have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority as if the company were
required to comply with these rules.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom. A review of interim financial information consists
of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Condensed
Consolidated Half Year Financial Statements and considered whether
it contains any apparent misstatements or material inconsistencies
with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with this ISRE.
However, future events or conditions may cause the group to cease
to continue as a going concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Condensed Consolidated Half Year Financial Statements,
including the interim financial statements, is the responsibility
of, and has been approved by the directors. The directors are
responsible for preparing the Condensed Consolidated Half Year
Financial Statements in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority as if the company were required to comply with
these rules. In preparing the Condensed Consolidated Half Year
Financial Statements, including the interim financial statements,
the directors are responsible for assessing the group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
group or to cease operations, or have no realistic alternative but
to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the Condensed Consolidated Half Year
Financial Statements based on our review. Our conclusion, including
our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the
Basis for conclusion paragraph of this report. This report,
including the conclusion, has been prepared for and only for the
company for the purpose of complying with the Disclosure Guidance
and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority as if the company were required to comply with
these rules and for no other purpose. We do not, in giving this
conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent
in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
3 August 2022
[1] Revenues from associate businesses are excluded from
reported revenue figures.
([2]) 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. A
reconciliation to statutory profit before taxation can be found in
the notes to the condensed consolidated financial statements.
Please refer to the reconciliation on page 31.
[3] 2021 underlying profit has been restated following the
quantification of historical underpayments of employee
entitlements. See note 1.4a for details of the restatement.
[4] The Solvency II capital coverage ratio is an estimate and
unaudited.
[5] On 1 July 2021, we formed the new Bupa Asia Pacific Market
Unit, comprising our businesses in Australia, New Zealand and Hong
Kong SAR. These results and comparatives are presented as the new
Market Unit.
[6] Our total customers as reported in 2021 Annual Report.
[7] 179% is the FY 2021 solvency coverage ratio.
[8] GSP is substituted for the insurance premium risk parameter
in the standard formula, reflecting the Group's own loss
experience.
[9] On 1 July 2021, we formed the new Bupa Asia Pacific Market
Unit, comprising our businesses in Australia, New Zealand and Hong
Kong SAR. These results and comparatives are presented as the new
Market Unit.
[10] 2021 underlying profit has been restated following the
quantification of historical underpayments of employee
entitlements. See note 1.4a for details of the restatement.
[11] Bupa HI Pty Ltd (Australia): based on S.05.01 Prudential
Regulation Authority (SII) form (estimated and unaudited).
[12] Source: APRA Market Share highlights report
[13] Sanitas S.A. de Seguros (Spain): Prepared under local GAAP
(unaudited).
[14] Bupa Insurance Limited: Prepared under local GAAP. Excludes
our associate Highway to Health (GeoBlue).
[15] On 1 July 2021, Hong Kong SAR entities were incorporated
into a new Market Unit called Bupa Asia Pacific.
[16] Revenue in Other Businesses comprises of brand fees
received from our associate business in Saudi Arabia as a
percentage of total revenue, this is alongside our share of profit
we receive as part of our 43.25% ownership.
This information is provided by RNS, the news service of the
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END
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