TIDMBUPF
RNS Number : 6228H
BUPA Finance PLC
05 August 2021
Bupa Finance plc (Bupa Finance)
HALF YEAR STATEMENT FOR THE SIX MONTHS TO 30 JUNE 2021
KEY POINTS
-- Revenue ([1]) of GBP6.5bn was up 9% (2020: GBP5.9bn ([2])
) at constant exchange rates (CER) with year-on-year growth
in the majority of our business lines.
-- Underlying profit ([3]) before taxation of GBP238m, was up
38% at CER (2020: GBP172m) as the impacts of COVID-19 started
to subside in some markets, with health provision and aged
care performance returning towards more normal trading levels,
offset by an increase in claims in our insurance businesses.
-- Statutory profit before taxation of GBP295m was up 54% at
actual exchange rates (AER) (2020: GBP191m).
-- Solvency II capital coverage ratio ([4]) remains strong at
163% (FY 2020: 160%).
Performance review : "These results reflect Bupa's resilience
and how well our teams have served our customers as our businesses
navigate the pandemic. Although restrictions are generally being
lifted around the world, we remain vigilant as the pandemic is not
yet over."
Market performance (all at CER)
-- Australia and New Zealand: Revenue increased by 6% to GBP2,549m
largely due to strong customer retention and the 2020 premium
rate deferral in health insurance, and improved customer
volumes in our health provision business. Underlying profit
increased to GBP144m, reflecting stronger health provision
business performance, reduced losses in aged care and an
improved result in health insurance.
-- Europe and Latin America: Revenue grew by 14% to GBP2,016m
and underlying profit was down 4% at GBP79m as growth in
our insurance portfolio, improved health provision and aged
care results, were offset by increased insurance claims following
the disruption to supply seen in the first half of 2020.
-- Bupa Global and UK: Revenue was up 9% to GBP1,660m. This
was driven by higher health provision customer volumes; and
the impact of the provision for the pledge we made to pass
back any exceptional financial benefit ultimately arising
from the pandemic to eligible customers (UK return of premium
commitment) being lower than it was during the first half
of 2020. Underlying profit was down 36% to GBP16m, as improved
dental results were more than offset by higher year-on-year
claims in Bupa Global, our International Private Medical
Insurance (IPMI) business.
-- Other businesses : Revenue was up 5% to GBP232m with higher
revenue in our Health Services business in Hong Kong SAR.
Underlying profit was down 16% to GBP27m predominantly reflecting
the ongoing COVID-19 impacts on our associate business in
India.
Financial position
-- Solvency II capital coverage ratio of 163% (FY 2020: 160%).
-- Leverage is 32.1% (FY 2020: 33.6%) when including IFRS 16
leases as liabilities. Excluding these liabilities, the leverage
ratio is 25.0% (FY 2020: 26.3%).
-- Net cash generated from operating activities was GBP482m,
down GBP448m on prior year (2020: GBP930m) reflecting the
delay in claims outflows in the insurance businesses in 2020
partly offset by the return towards more normal trading levels
across provision and insurance businesses.
Operational highlights
-- We launched a new Group Strategy
-- We announced the appointment of James Lenton as Chief Financial
Officer (CFO) and he is due to join Bupa in September 2021.
-- We committed to the Science Based Targets Initiative (SBTi)
to reduce our carbon emissions.
-- With effect from 1 July, Bupa Hong Kong has been incorporated
into the Australia and New Zealand Market Unit to form Bupa
Asia Pacific. Also, from the same date, our associate business
in India, Max Bupa, is being rebranded Niva Bupa and will
be overseen by the Bupa Global and UK Market Unit.
Enquiries
Media
Rupert Gowrley (Corporate Affairs): rupert.gowrley@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 31
million [5] 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,
Turkey, 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
COVID-19 remains a global challenge but there is more optimism
now as vaccination programmes make progress in many countries, and
our businesses adapt to the evolving rules and restrictions. Some
of our markets have started to emerge from what we hope are the
worst parts of the pandemic, although there are many issues still
to navigate.
We are continuing to respond to the impacts of the pandemic and
play our part in national responses, and we are constantly struck
by the unceasing commitment and passion of Bupa's people. They have
been amazing in how hard they have worked and how they are
continuing to care for our customers and provide great service. We
are very proud of all of them.
We have maintained our financial resilience through successive
waves of the pandemic. Our Half Year 2021 results reflect the
underlying strength of Bupa and improved trading conditions in many
of our markets and across our business lines. Revenue was GBP6.5bn,
up 9% year-on-year (2020: GBP5.9bn at CER) , and underlying profit
increased by 38% to GBP238m (2020: GBP172m at CER) .
In health insurance, although revenue has grown, we have seen
profits reduce year-on-year driven by a higher claims figure as the
disruption to healthcare services seen in 2020 has reduced. Our
health provision businesses are coming back strongly as they
navigate successive lockdowns and evolving restrictions. Customer
volumes in our dental businesses are improving well. We are seeing
occupancy rates improving in our aged care businesses as some
lockdown restrictions are eased . Protecting residents and staff
remains our absolute focus and we are continuing to invest in
safety equipment, staff training and support.
We are pleased with this set of first half results but we know
we cannot stand still and will keep working hard through this year
and beyond to keep navigating the challenges that arise from these
uncertain times. Looking forward, we have undertaken a significant
refresh of Bupa's strategy fundamentals which we believe will
position us for success into the future.
Outlook
Although several of our markets have reached the advanced stages
of vaccine deployment, it is clear COVID-19 will still impact
economies and health systems for the foreseeable future. We're
positive about our future prospects as restrictions, in general,
continue to be lifted around the world, although we will remain
vigilant as the challenges arising from the pandemic are not yet
over.
Conditions in some markets remain challenging and there remains
uncertainty to the timing and volume at which insurance claims will
return. In Chile, our insurance business continues to be impacted
by regulatory decisions, which reflect the political and social
environment in the country. We are taking actions to strengthen
this business. In aged care, trading conditions remain challenging,
however with more residents being admitted, improved operating
performance and some recent portfolio optimisation, this line of
business should continue to move towards profitability.
We are well placed to navigate challenges and take opportunities
because of our underlying financial strength, resilience and our
diversified business model. We are focussed on embedding our new
strategy and driving growth and transformation.
MARKET UNIT PERFORMANCE
Australia and New Zealand
Revenue Underlying profit
HY 2021 GBP2,549m GBP144m
HY 2020 [6] (AER) GBP2,251m GBP73m
% growth 13% 97%
HY 2020 6 (CER) GBP2,396m GBP78m
% growth 6% 85%
Revenue increased by 6% to GBP2,549m at CER. Underlying profit
increased to GBP144m, driven by increased customer volumes in
Australian Health Services, lower operating costs in Australian
Aged Care and improved margins in Australian Health Insurance.
While COVID-19 restrictions generally eased in the first half of
2021, there were ongoing impacts across our businesses and we
continued to prioritise the health and safety of our customers and
employees through localised lockdowns.
In the Australian Health Insurance business, revenue grew
year-on-year. Strong customer retention and favourable net
downgrades contributed to improved performance. 2020 premium
revenue was impacted by our decision to support customers through
the COVID-19 financial hardship scheme, which included premium
waivers, discounts and policy suspensions. Claims activity
continued to be volatile in the first half of 2021 with ongoing
uncertainty and localised lockdowns suppressing claims. Whilst this
disruption was not as great as it was in H1 2020, net claims period
to period were only marginally higher, given a deferred claims
provision (DCP) was raised at H1 2020, which we continue to hold at
30 June 2021 (GBP180m). The combined operating ratio ([7]) (COR)
for H1 2021 was 93% ([8]) (2020: 95%). We continue to invest to
meet customers' evolving needs, including launching a new loyalty
programme for longstanding customers.
Health Services in Australia delivered year-on-year revenue
growth of 21% at CER driven by improved customer volumes across
most businesses although government mandated lockdowns continued to
impact our business. We launched Medical and Health Advisory
Services for the Department of Veterans' Affairs (DVA) on 1 April.
This network of health professionals provides clinical advice,
communication and quality assurance activities to the DVA.
Although revenue in our Australian Aged Care business was stable
year-on year, our operating loss reduced significantly. This was
the result of implementing a number of business improvement
initiatives, and included portfolio optimisation with five homes
being sold or closed in the first half of 2021. We officially
opened our first Australian retirement village, Bupa Sutherland, in
March. Overall closing occupancy rate improved to 88% (HY 2020:
82%). The Royal Commission into Aged Care Quality and Safety
published its final report in March 2021. We welcomed the Federal
Government's response, which committed additional investment into
the sector to support better care over the next five years. This
represents an important first step in addressing overall sector
challenges and we continue to work through the detailed
implications.
In our New Zealand Aged Care business, revenue was flat and
underlying profit declined as a result of higher operating costs .
Retirement village sales increased by 70% as units across a number
of new developments became available. Care home closing occupancy
rate remained stable at 88% (HY 2020: 89%). The sale of seven
rehabilitation sites and of one care home were completed . We
officially opened our new Foxbridge Retirement Village and Care
Home.
Europe and Latin America
Revenue Underlying profit
HY 2021 GBP2,016m GBP79m
HY 2020 (AER) GBP1,827m GBP85m
% growth/(decline) 10% (7%)
HY 2020 (CER) GBP1,769m GBP82m
% growth/(decline) 14% (4%)
Revenue grew by 14% and underlying profit declined by 4% at CER
with portfolio growth seen in nearly all our insurance businesses,
improved performance in our health provision business and
efficiency initiatives in aged care. This was more than offset by a
return to more normal claims performance as customers were better
able to access private healthcare that was unavailable at times
during H1 2020.
Our health insurance business in Spain, Sanitas Seguros,
delivered solid revenue performance driven by sales, including a
historic record of nearly 96,000 net new customers in H1 2021.
Underlying profit declined by 43% at CER due to higher claims than
in the previous year as lockdown measures were eased. The COR for
the half year was 89% ([9]) (2020: 84%). We continued to enhance
our digital offer with our new service, BluaU Smart, in which the
customer actively participates in the product design choosing from
a selection of innovative personalised cover options.
Our Dental business in Spain delivered good results. Revenue and
underlying profit grew, driven by higher activity in our dental
centres as we return to more normal operating levels after
lockdowns. In March, our dental centres reached their highest level
of new customers per working day and we continued to increase video
consultation volumes.
In our Hospitals business in Spain, revenue and underlying
profit grew year-on-year driven by increased customer visits as
lockdowns eased. As part of our continued pandemic response, we
launched the COVID-19 Medical Advisor: a service provided by
medical professionals who support our customers and activate close
contact tracing. To date, we have tested over 380,000 customers. We
have also introduced Sanitas' Home Hospitalisation Unit, which
offers continuous support to patients recovering in their
homes.
In Sanitas Mayores, our aged care business in Spain, underlying
profit improved year-on-year due to efficiency initiatives and some
recovery in occupancy. We have launched a new campaign to attract
new residents and we have included health insurance cover for all
aged care customers. Closing occupancy rate was 80% (HY 2020: 78%),
which has been progressively increasing during 2021.
In Chile, revenue grew mainly driven by good performance in our
outpatient business, Integramedica and Clinica Bupa Santiago
Hospital. Underlying profit, however, was down year-on-year, driven
by higher claims in the Isapre insurance business with regulatory
interventions, which included preventing premium adjustments and
mandating extensions to cover, impacting the whole sector.
In Poland, LuxMed delivered good revenue growth, partly driven
by growth in the corporate subscription business customer base of
over 8% year-on-year. Underlying profit was stable year-on-year
predominantly due to COVID-19 related costs offsetting revenue
growth. We continued to enhance and expand telehealth and digital
health services. As part of our response to the pandemic, St.
Elisabeth Hospital in Warsaw continued to work with the public
sector to care for COVID-19 patients.
In Turkey, our health insurance business Bupa Acıbadem Sigorta,
delivered good revenue growth, while underlying profit decreased
due to higher claims compared to 2020 as lockdowns eased.
Care Plus in Brazil delivered solid revenue and customer growth.
Bupa Mexico delivered strong revenue growth, while underlying
profit was stable. Bupa Global Latin America (BGLA) saw underlying
performance improve steadily year-on-year.
Bupa Global and UK
Revenue Underlying profit
HY 2021 GBP1,660m GBP16m
HY 2020 (AER) GBP1,532m GBP26m
% growth/(decline) 8% (38%)
HY 2020 (CER) GBP1,516m GBP25m
% growth/(decline) 9% (36%)
We achieved good revenue growth of 9% at CER driven mainly by a
strong increase in customer visits in the dental business, and the
reduction in the impact of the UK return of premium provision
compared to 2020.Underlying profit decreased by 36% at CER, mainly
driven by higher claims in Bupa Global. This was partly offset by
improved year-on-year performance in UK Dental and higher revenue
in UK Insurance.
UK Insurance revenue was up and underlying profit increased due
to improved product mix. Following the commitment made to pass back
any exceptional financial benefit ultimately arising as a result of
the temporary disruption to some medical treatments in 2020, we
announced in March 2021 that eligible customers would receive a
share of GBP125m. We are the first major health insurer to do this
and payment has been made to around 290,000 customers to date. The
final settlement is yet to be determined as we continue to see how
claims rebound, and we retain a residual provision of GBP40m at 30
June 2021. We continue to expand our digital services. We are
supporting 6,000 customers a week with Digital GP appointments, and
42% of our business customers now use our Bupa Connect portal.
In Bupa Global, our IPMI business, revenue was stable and
underlying profit declined as claims levels increased, including a
bounce back from the lower levels experienced in 2020. We have
continued to see an increase in customers using our Global Virtual
Care app which provides remote access to a global network of
doctors. Over 68% of our customers now interact with us through our
enhanced digital channels, and around half of claims are now done
online.
The COR for Bupa Insurance Limited, the UK based insurance
entity that underwrites both domestic and international insurance,
deteriorated to 97% ([10]) (HY 2020: 94%) largely reflecting
increased claims in Bupa Global.
UK Dental delivered improved performance with strong revenue
growth year-on-year due to increased private customer visits. The
business is welcoming an increasing number of NHS patients. The
limitations imposed by COVID-19 safety measures are unlikely to be
relaxed in the short term, thereby continuing to restrict the
number of appointments and increasing costs.
Revenue in UK Care Services was flat year-on-year and underlying
profit was stable as the sector continues to be supported by
government infection control funding. There has been a steady
increase in occupancy during 2021. The closing occupancy rate was
up to 82% (HY 2020: 78%). In Richmond Villages, property sales
increased to pre-pandemic levels.
In Health Services, revenue increased by 13% driven by increased
customer activity in the clinics while underlying profit was stable
year-on-year. We continue to develop our COVID-19 testing services.
At the Cromwell Hospital, the "long COVID" clinic had increased
demand and the hospital continues to work in partnership with NHS
England to provide time-critical cancer and cardiac care for NHS
patients.
Other businesses
Revenue Underlying profit
HY 2021 GBP232m GBP27m
HY 2020 (AER) GBP243m GBP35m
% decline (5%) (23%)
HY 2020 (CER) GBP221m GBP32m
% growth/(decline) 5% (16%)
Revenue in our other businesses was GBP232m up 5% at CER, driven
by our Hong Kong SAR business with higher check-up and nursing
services in health provision, as well as strong corporate client
retention in insurance. Underlying profit in other businesses was
down 16% to GBP27m at CER largely driven by higher COVID-19 related
claims in our associate business in India, which is being rebranded
to Niva Bupa.
FINANCIAL REVIEW
Overview
Revenue was GBP6.5bn, up 9% on the prior year (2020: GBP5.9bn
[11] at CER), and underlying profit was GBP238m, up 38% (2020:
GBP172m at CER). The Group's underlying results reflect the impacts
of COVID-19 starting to subside in many markets, with health
provision and aged care performance improving, partially offset by
increased insurance claims levels following reduced disruption
year-on-year.
Our statutory profit before taxation was GBP295m, up 54% (2020:
GBP191m at AER), reflecting higher underlying profit, and gains
made on acquisitions and divestments, including a one-off gain
arising upon the transfer of customers from CS Healthcare into our
UK Insurance business and divestment of the rehabilitation business
in New Zealand.
Bupa generated cash from operating activities of GBP482m, down
GBP448m on prior year (2020: GBP930m) reflecting the delay in
claims outflows in the insurance businesses in 2020 partly offset
by the return towards more normal trading levels across provision
and insurance businesses.
The Group's Solvency II capital coverage ratio [12] of 163% at
30 June 2021 (FY 2020: 160%) sits comfortably within our target
working range of 140-170% and reflects our ongoing financial
resilience, despite the continued volatility caused by the
pandemic.
Revenue (CER)
Revenue was up 9% as a result of portfolio growth, price rises
in a majority of our insurance markets, and increased activity in
our health provision businesses.
Revenue in insurance grew by 5%. Our insurance customers
increased by 9% year-on-year, with growth coming in Europe and
Latin America, particularly in our Spanish and Turkish businesses.
Revenue was also buoyed by approved premium rises in Australia
where an agreed change was postponed in 2020, and which are set in
the context of medical inflation.
Our health provision businesses saw revenue growth of 34%
reflecting higher customer numbers as the impacts of COVID-19 began
to subside and health facilities were generally able to operate
more normally.
In our aged care businesses, revenue was broadly in line with
2020 with overall occupancy rates 3 percentage points higher as
restrictions began to ease and residents being able to be admitted
to our homes. This was offset by some targeted disposals of homes
as part of portfolio management.
Underlying profit (CER)
Group underlying profit increased by 38% to GBP238m (2020:
GBP172m at CER). This reflects our businesses beginning to emerge
from the pandemic, which has resulted in insurance profits reducing
as claims levels return, and higher profits in health provision and
aged care as a result of reduced lockdowns and government
restrictions as well as lower COVID-19 related costs.
For our largest line of business, health insurance, despite
revenue growth, underlying profit decreased due to a higher
incurred claims number when compared to the particularly volatile
claims experience during the first half of 2020. As lockdown
measures began to be lifted across most of our markets, our
customers began to access private healthcare facilities which they
had not been able to at times during the prior year. During the
first half of 2021, we have seen a trend of incurred claims
returning towards more normalised levels, however the volume and
timing of these varies market by market. Given the restriction on
supply during the first half of last year, we held deferred claims
reserves (30 June 2020: GBP389m) in many of our markets, however at
H1 2021 we are only holding a reserve in Australia (GBP180m).
Despite the reduction in such reserves, claims experience during
the first half of 2021 drives a period-on-period reduction in
underlying profit.
In the UK we had held a provision at the beginning of the year
to satisfy our commitment to pass on any exceptional financial
benefit ultimately arising from the pandemic to eligible UK PMI
customers (FY 2020: GBP145m). In March 2021 we announced that
eligible customers would receive a share of GBP125m. To date we
have made cash payments to around 290,000 customers, the first
major health insurer to do so. The final settlement is yet to be
determined as we continue to monitor claims experience, and at 30
June 2021 we retain a residual provision of GBP40m.
We returned to profitability in our health provision businesses,
as capacity restrictions in the majority of our markets reduced.
This is in contrast to the prior year when there were a number of
temporary closures due to localised government restrictions.
The underlying loss in aged care reduced significantly
year-on-year, with revenue and customer levels broadly in line, but
with lower costs, particularly on agency staffing and PPE,
benefitting these results. Overall occupancy rates still remain
below historical levels, as localised restrictions continue to
arise intermittently. We have taken targeted actions to optimise
our care home portfolio, and as restrictions continue to ease, we
expect the aged care business to move back to profitability,
although long-term structural challenges around government funding
remain in some markets.
Central expenses and net interest margin of GBP28m were lower
than prior year (2020: GBP45m at CER) as higher investment returns
were partly offset by the additional interest costs associated with
the debt issuances completed in June 2020.
Statutory profit
Statutory profit before taxation was GBP295m up 54% (2020:
GBP191m), driven by both underlying and non-underlying results. The
non-underlying items totaled GBP57m profit in 2021, compared with
GBP13m profit in 2020.
The key drivers for non-underlying items in 2021 were property
revaluation gains in our New Zealand retirement villages, gains
made on the divestment of the rehabilitation business in New
Zealand and a one-off gain on acquisition, arising upon the
transfer of customers from CS Healthcare into our UK Insurance
business (GBP39m).
2021 2020
GBPm GBPm
Australia and New Zealand at CER [13] 144 78
------ ------
Europe and Latin America at CER 79 82
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Bupa Global and UK at CER 16 25
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Other businesses at CER 27 32
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Underlying profit for reportable segments
at CER 266 217
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Central expenses and net interest margin
at CER (28) (45)
------ ------
Consolidated underlying profit before taxation
at CER 238 172
------ ------
Foreign exchange re-translation on 2020 results
(CER/AER) - 6
------ ------
Consolidated underlying profit before taxation
at AER 238 178
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Impairment of intangible assets and goodwill
arising on business combinations (1) -
------ ------
Net gains/(losses) on disposal of businesses
and transaction costs on business combinations 9 (5)
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Net property revaluation gains 7 10
------ ------
Realised and unrealised foreign exchange
gains 9 14
------ ------
Gains/(losses) on return-seeking-assets,
net of hedging 3 (5)
------ ------
Other non-underlying items 30 (1)
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Total non-underlying items 57 13
------ ------
Statutory profit before taxation at AER 295 191
------ ------
Taxation
The Group's effective tax rate for the period was 25% (2020:
24%), which is higher than the current UK corporation tax rate of
19%. This is mainly due to profits arising in jurisdictions with a
higher rate of corporate income tax than the UK. The revaluation of
UK deferred tax balances following the change in enacted UK tax
rate from 19% to 25% did not have a material impact on the
effective tax rate for the period.
Cashflow
Net cash generated from operating activities decreased by
GBP448m to GBP482m, reflecting the delay in claims outflows in the
insurance businesses in 2020; partially offset by the return
towards more normal trading levels and revenue growth across some
provision and insurance businesses.
Net cash used in investing activities decreased by GBP324m to
GBP199m in the first half of the year due to lower deposits than
during the same period last year as a result of higher levels of
claims being made.
Net cash used in financing activities has increased by GBP514m
to GBP336m. This movement is driven by the Group issuing GBP300m
senior and GBP350m Tier 2 bonds in June 2020, with the repayment of
GBP350m senior bond in June 2021 primarily funded through partial
drawdown of the Group's revolving credit facility (RCF).
Funding
We manage our funding prudently to ensure a strong platform for
continued growth. 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.
The Company's senior debt ratings are A3 (negative) by Moody's
and BBB+ (stable) by Fitch with no changes in the period.
The Company's Long-Term Issuer Default Rating (LT IDR) from
Fitch is 'A-' and senior and Tier 2 bonds BBB+ and BBB-
respectively. Bupa Insurance Limited's Insurer Financial Strength
(IFS) rating and LT IDR are A+ (Strong) and A respectively. The
outlook on both the Company's LT IDR and Bupa Insurance Limited's
IFS ratings is stable. Moody's Bupa Insurance Limited Insurance
Financial Strength Rating is A1 and the senior and subordinated
debt ratings of the Company are A3 and Baa1 respectively, with a
negative outlook.
A GBP350m senior bond was repaid on its maturity in June 2021
following the issuance of a GBP300m senior and a GBP350m Tier 2
bond in June 2020.
At 30 June 2021, our GBP800m RCF was drawn by GBP290m. The RCF
matures in August 2022 and will be refinanced well in advance of
its expiry. In the period, we also put in place a EUR30m bank
facility in Spain to further support local and therefore Group
liquidity. This remains fully undrawn.
We focus on managing our leverage in line with our credit rating
targets. Leverage excluding operating leases at 30 June 2021 was
25.0% (FY 2020: 26.3%). Leverage is 32.1% (FY 2020: 33.6%) when
IFRS 16 lease liabilities are taken into account.
Coverage of financial covenants remains well within the levels
required in our bank facilities.
Solvency [14]
The Group's solvency coverage ratio of 163% remains strong and
comfortably within 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 2021, the estimated SCR of GBP2.5bn was
the same as at 31 December 2020 and Own Funds of GBP4.1bn was
GBP0.1bn higher when compared to 31 December 2020.
The Group surplus capital was estimated to be GBP1.6bn, compared
to GBP1.5bn at 31 December 2020, representing a solvency coverage
ratio of 163% (FY 2020: 160%). Our business continued to generate
capital through our underlying profitability. This capital
generation was largely offset by capital expenditure, debt
financing costs and negative foreign exchange movements during the
period as GBP appreciated against all major currencies.
The Group performs 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 14 percentage point
reduction to the solvency coverage ratio.
The Bupa Group's 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 163%
----------------
Property values -10% 149%
----------------
Loss ratio worsening by 2% 156%
----------------
Interest rate -100bps 161%
----------------
Sterling appreciates by 10% 162%
----------------
Group Specific Parameter (GSP) [15] +0.2% 162%
----------------
Credit spreads +100bps 163%
----------------
Pension risk +10% 163%
----------------
Equity markets -20% 163%
----------------
As detailed in the Group's 2020 Annual Report and Accounts, Bupa
includes a Group Specific Parameter ('GSP') in respect of the
insurance risk parameter in the Standard Formula. The 2020 claims
experience is not included in the GSP data set supporting the
estimated HY 2021 SCR. It is the Group's judgement that the
exceptional volatility experienced in 2020 claims as a result of
COVID-19, is not representative of future premium risk. We are
currently in discussions with the PRA to confirm how the impact of
the pandemic will be taken into consideration in future reporting
periods.
BUSINESS RISKS
We described our main risks in the Risk section of the Annual
Report and Accounts 2020, which is available on Bupa.com. In the
period to 30 June 2021 we are still seeing impacts from the
COVID-19 pandemic which has resulted in significant uncertainty for
society as a whole and for Bupa, but the principal risks and themes
previously identified at the 2020 year-end also remain. Across Bupa
we continue to take action to address ongoing operational risks and
challenges in regards to the management of the pandemic.
Governments continue to use varying levels of restrictions to
control the infection rate. We are prepared for the operational
impacts, including the potential closures of provision facilities,
restrictions on resident visitation rights and changes in
restrictions across our markets.
Strategic and financial risks and risks impacting our ability to
deliver for our customers:
The macroeconomic environment is challenging in most markets,
and this is compounded by COVID-19. It is uncertain how severe the
impacts will be and how long they will last but any reduction in
consumer or government spending may impact our businesses. Medical
inflation continues to increase at a higher rate than income
inflation and this is likely to be exacerbated by weakened economic
environments. As a result, we are likely to see insurance premium
increases at rates lower than medical inflation to maintain
affordability of health insurance. This is particularly true in
Australia, where the government continues to approve premium
increases well below medical inflation.
Although claims costs have increased compared to last year as a
result of some restrictions in place being lifted, disruptions
still continue and the cost of claims could increase in the long
run due to deferred costs of treating under-treated illnesses.
We have undertaken a range of stress and scenario analyses on
our businesses to understand the potential impact of the pandemic
on our business performance, solvency capital and liquidity
position. This has helped us understand and mitigate the impact of
the pandemic as far as possible and develop appropriate targeted
actions to respond to these challenges. These tests have been
designed to assess the impact on both 2021 and over the Group's
three-year planning period.
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 has shown that future legislation,
regulations and government funding decisions could have a material
impact on the Group. We continue to engage both 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.
Operational Risks:
Information Security and Privacy remain key risks for the Group.
Our focus on information security, technology and operational
resilience in recent years, supported by significant investment to
uplift capability and capacity in this area across the Group, has
been critical in our response to this crisis. This investment has
equipped us to effectively enhance digital and telehealth services
and enabled our people to work remotely.
Following the pandemic, we are likely to see extensive and
wide-ranging reviews into all aspects of the public and private
response. These responses will often be judged in hindsight and
this increases the risk of potential future litigation for all
participants in the health care sector, including Bupa.
Social and environmental risks:
The pandemic has further demonstrated the importance of managing
our reputation, with higher scrutiny on the actions of businesses
in respect of customers, employees; and their contributions to
society. It is more important now than ever that we continue to
deliver on our purpose and serve and support our customers, our
people and the communities we operate in.
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 new 3x6 strategy. We closely manage our
environmental impacts and promote positive environmental practices.
The Group's longer term exposure to climate change falls into two
broad categories. Physical risks, particularly to the Group's
property assets arising from severe weather events and the longer
term health impacts, including possible increases in frequency of
pandemics, as a result of the link between planetary and population
health which may impact insurance claims and product design in the
long term; and transition risks from the move to a low carbon
economy, which will impact the value of those investments
associated with higher levels of greenhouse gas emissions and
affect the broader macroeconomic environment.
We have established a Group wide Environment and Climate Action
programme, overseen by the Board Sustainability Committee, to
consider and take appropriate action for Bupa. This programme
includes considerations relating to our own carbon output, Risk
Management processes and procedures, health implications from
climate change and reporting and disclosure.
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. The pandemic has reinforced
that our Risk Management Framework remains appropriate for Bupa and
has operated effectively, even during these extraordinary times.
Internal controls, particularly regarding customer conduct and
information security and privacy, continue to be key areas of
focus.
BUPA AROUND THE WORLD
Australia and New Zealand
-- Bupa Health Insurance, with 4m customers, is a leading health
insurance provider in Australia and also offers health insurance
for overseas workers and visitors.
-- Bupa Health Services is a health provision business, comprising
dental, optical, audiology, medical assessment services,
and health services for the Australian Defence Force (ADF)
and the Department of Veterans' Affairs.
-- Bupa Villages and Aged Care Australia cares for around 5,700
residents across 63 homes and 1 Retirement Village in Australia.
-- Bupa Villages and Aged Care New Zealand cares for around
3,300 residents across 48 care homes. It also operates 35
independent living retirement villages in Aotearoa, New Zealand.
Europe and Latin America
-- Sanitas Seguros is the second largest health insurance provider
in Spain, with 1.9m customers.
-- Sanitas Dental provides dental services through 200 centres
and third-party networks in Spain.
-- Sanitas Hospitales and New Services comprise four private
hospitals, 31 private medical clinics and one public hospital
under a Public-Private partnership model.
-- Sanitas Mayores cares for around 5,100 residents in 46 care
homes and operates six day-care centres in Spain.
-- LuxMed is a leading private healthcare business in Poland,
operating in health funding and provision through 12 hospitals
and 248 private clinics.
-- Bupa Chile is a leading health insurer in Chile in terms
of contracts and has around 789,000 customers. It offers
provision services across four hospitals and 34 medical clinics.
-- Bupa Acıbadem Sigorta is Turkey's second largest health
insurer, with products for corporate and individual customers,
and has around 910,000 customers.
-- Care Plus is a leading health insurance company in Brazil,
with around 125,000 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 around 57,000 customers.
-- Bupa Global Latin America provides international health insurance,
local health insurance, and travel insurance in Latin America
to around 70,000 customers.
Bupa Global and UK
-- Bupa UK Insurance is a leading health insurer, with 2.3m
customers.
-- Bupa Global serves over 491,000 IPMI customers and administers
medical assistance for individuals, small businesses and
corporate customers.
-- Bupa Dental Care UK is the leading provider of private dentistry
in the UK, providing dental services through 488 centres
across the UK and Ireland.
-- Bupa Care Services has around 6,000 residents in 124 care
homes, and 10 Richmond care villages.
-- Bupa Health Services comprises 50 health clinics, and the
Cromwell Hospital in London.
Other businesses
We also have associate health insurance businesses in Saudi
Arabia (Bupa Arabia) and India (Max Bupa, which is being rebranded
to Niva Bupa), an interest in MyClinic in Saudi Arabia, a health
insurance and provision business in Hong Kong SAR and a
representative office and medical centre in mainland China.
Bupa Finance plc
(Company No. 2779134)
Condensed Consolidated Half Year Financial Statements
(unaudited)
Six months ended 30 June 2021
Bupa Finance plc
Condensed Consolidated Income Statement (unaudited)
for six months ended 30 June 2021
Note For year
For six months ended ended
For six months ended 30 June 2020 31 December 2020
30 June 2021 restated(1) restated(1)
GBPm GBPm GBPm
--------------------------------------------- ----- --------------------- --------------------- ------------------
Revenues
Gross insurance premiums 4,633 4,387 8,908
Premiums ceded to reinsurers (47) (47) (95)
--------------------------------------------- ----- --------------------- --------------------- ------------------
Net insurance premiums earned 4,586 4,340 8,813
Care, health, and other customer contract
revenue 1,837 1,467 3,230
Other revenue 34 46 99
--------------------------------------------- ----- --------------------- --------------------- ------------------
Total revenues 3 6,457 5,853 12,142
--------------------------------------------- ----- --------------------- --------------------- ------------------
Claims and expenses
Insurance claims incurred (3,685) (3,308) (6,712)
Reinsurers' share of claims incurred 35 31 57
Net insurance claims incurred (3,650) (3,277) (6,655)
--------------------------------------------- ----- --------------------- --------------------- ------------------
Share of post-taxation results of equity
accounted investments 25 36 56
Impairment of goodwill and intangible assets (3) - (18)
Other operating expenses (2,539) (2,355) (4,921)
Other income and charges 4 46 (5) 1
Total claims and expenses (6,121) (5,601) (11,537)
--------------------------------------------- ----- --------------------- --------------------- ------------------
Profit before financial income and expense 336 252 605
Financial income and expense
Financial income 5 47 39 92
Financial expense 5 (87) (91) (180)
Net impairment loss on financial assets (1) (9) (15)
Net financial expense (41) (61) (103)
--------------------------------------------- ----- --------------------- --------------------- ------------------
Profit before taxation expense 295 191 502
Taxation expense 6 (75) (45) (117)
Profit for the financial period 220 146 385
--------------------------------------------- ----- --------------------- --------------------- ------------------
Attributable to:
Bupa Finance plc 219 145 383
Non-controlling interests 1 1 2
--------------------------------------------- ----- --------------------- --------------------- ------------------
Profit for the financial period 220 146 385
--------------------------------------------- ----- --------------------- --------------------- ------------------
1. Balances have been restated for a gross up between other
revenue and financial expense in relation to the remeasurement
of imputed revenue and interest in respect of interest-free
refundable accommodation deposits received by the Group
as payment for aged care units in Bupa Villages and Aged
Care - Australia. Refer to Note 1.4 for further details.
Bupa Finance plc
Condensed Consolidated Statement of Comprehensive Income
(unaudited)
for six months ended 30 June 2021
For year
For six months ended For six months ended ended
30 June 2021 30 June 2020 restated(1) 31 December 2020
GBPm GBPm GBPm
----------------------------------------------- --------------------- -------------------------- ------------------
Profit for the financial period 220 146 385
----------------------------------------------- --------------------- -------------------------- ------------------
Other comprehensive income/(expense)
Items that will not be reclassified to the
Income Statement
Remeasurement losses on pension schemes - - (5)
Unrealised losses on revaluation of property (10) (2) (5)
Taxation credit on income and expenses
recognised directly in other comprehensive
income 3 - 5
Items that may be reclassified subsequently to
the Income Statement
Foreign exchange translation differences on
goodwill (73) 74 63
Other foreign exchange translation differences (146) 175 42
Net gains/(losses) on hedge of net investment
in overseas subsidiary companies 46 (68) (62)
Change in fair value of financial investments
through other comprehensive income 2 1 7
Share of other comprehensive income of equity
accounted investments 7 - 13
Change in cash flow hedge reserve(2) (21) - -
Taxation credit on income and expenses
recognised directly in other comprehensive
income - - 2
----------------------------------------------- --------------------- -------------------------- ------------------
Total other comprehensive (expense)/income (192) 180 60
----------------------------------------------- --------------------- -------------------------- ------------------
Comprehensive income for the period 28 326 445
----------------------------------------------- --------------------- -------------------------- ------------------
Attributable to:
Bupa Finance plc 28 325 443
Non-controlling interests - 1 2
----------------------------------------------- --------------------- -------------------------- ------------------
Comprehensive income for the period 28 326 445
----------------------------------------------- --------------------- -------------------------- ------------------
1. Balances have been restated due to the IFRS Interpretations
Committee decision in relation to Multiple Tax Consequences
of Recovering an Asset. Refer to Note 1.4 for further details.
2. Change in cash flow hedge reserve includes a correction
of GBP(21)m in relation to amounts arising on the hedging
of acquisitions that should have been reallocated to goodwill
(GBP20m) or investments in associates (GBP1m) on conversion
to IFRS 9 Financial Instruments.
Bupa Finance plc
Condensed Consolidated Statement of Financial Position
(unaudited)
as at 30 June 2021
At 30 June
At 30 June At 31 December 2020
2021 2020 restated(1)
Note GBPm GBPm GBPm
------------------------------- ----- ----------- --------------- -------------
Goodwill and intangible
assets 7 3,626 3,820 3,871
Property, plant and equipment 8 3,869 4,115 4,245
Investment property 9 637 627 574
Equity accounted investments 869 868 804
Post-employment benefit
net assets 10 1 1 2
Restricted assets 11 156 149 123
Financial investments 12 2,980 2,865 2,796
Derivative assets 42 61 26
Deferred taxation assets 52 49 47
Current taxation assets 10 9 5
Assets arising from insurance
business 13 1,894 1,345 2,069
Inventories 111 126 104
Trade and other receivables 661 603 656
Cash and cash equivalents 14 1,596 1,706 1,843
Assets held for sale 15 148 8 292
------------------------------- ----- ----------- --------------- -------------
Total assets 16,652 16,352 17,457
------------------------------- ----- ----------- --------------- -------------
Subordinated liabilities 16 (1,248) (1,247) (1,595)
Other interest-bearing
liabilities 16 (1,028) (1,191) (1,171)
Lease liabilities (952) (1,010) (1,081)
Post-employment benefit
net liabilities 10 (12) (12) (7)
Provisions arising from
insurance contracts 17 (3,897) (3,212) (4,060)
Derivative liabilities (12) (77) (86)
Provisions for liabilities
and charges (210) (222) (191)
Deferred taxation liabilities (190) (187) (218)
Current taxation liabilities (81) (134) (126)
Other liabilities arising
from insurance business (221) (162) (188)
Trade and other payables (2,027) (2,151) (1,839)
Liabilities associated
with assets held for sale 15 (53) (1) (202)
------------------------------- ----- ----------- --------------- -------------
Total liabilities (9,931) (9,606) (10,764)
------------------------------- ----- ----------- --------------- -------------
Net assets 6,721 6,746 6,693
------------------------------- ----- ----------- --------------- -------------
Equity
Called up share capital 200 200 200
Property revaluation reserve 679 699 705
Income and expenditure
reserves 5,716 5,542 5,348
Cash flow hedge reserve - 21 21
Foreign currency translation
reserve 109 266 401
------------------------------- ----- ----------- --------------- -------------
Equity attributable to
Bupa Finance plc 6,704 6,728 6,675
Equity attributable to
non-controlling interests 17 18 18
------------------------------- ----- ----------- --------------- -------------
Total equity 6,721 6,746 6,693
------------------------------- ----- ----------- --------------- -------------
1. Balances have been restated due to the IFRS Interpretations
Committee decision in relation to Multiple Tax Consequences
of Recovering an Asset. Refer to Note 1.4 for further details.
Bupa Finance plc
Condensed Consolidated Statement of Cash Flows (unaudited)
for six months ended 30 June 2021
For six For year
For six months ended ended
months ended 30 June 2020 31 December 2020
30 June 2021 restated(1) restated (1)
Note GBPm GBPm GBPm
---------------------------------------------------------- ----- --------------- -------------- ------------------
Cash flow from operating activities
Profit before taxation expense 295 191 502
Adjustments for:
Net financial expense (1) 41 61 103
Depreciation, amortisation and impairment 239 235 501
Other non-cash items (1) (78) (52) (90)
Changes in working capital and provisions:
Increase in provisions and other liabilities arising from
insurance contracts 839 1,179 442
(Increase)/decrease in assets arising from insurance
business (577) (621) 16
Funded pension scheme employer contributions - - (1)
(Increase)/decrease in trade and other receivables, and
other assets (88) (34) 35
(Decrease)/increase in trade and other payables, and
other liabilities (66) 36 155
---------------------------------------------------------- ----- --------------- -------------- ------------------
Cash generated from operations 605 995 1,663
---------------------------------------------------------- ----- --------------- -------------- ------------------
Income taxation paid (116) (59) (153)
Increase in cash held in restricted assets 11 (7) (6) (32)
Net cash generated from operating activities 482 930 1,478
---------------------------------------------------------- ----- --------------- -------------- ------------------
Cash flow from investing activities
Acquisition of subsidiary companies and businesses , net
of cash acquired 2 (17) (25)
Investment in equity accounted investments (12) - (109)
Dividends received from associates 34 - -
Disposal of subsidiary companies and businesses , net of
cash disposed of 9 (5) -
Divestment in equity accounted investments 5 - -
Purchase of intangible assets 7 (34) (43) (114)
Purchase of property, plant and equipment (62) (85) (176)
Proceeds from sale of property, plant and equipment 2 2 99
Purchase of investment property (23) (27) (59)
Disposal of investment property - 1 1
Purchases of financial investments, excluding deposits
with credit institutions (385) (498) (1,440)
Proceeds from sale and maturities of financial
investments, excluding deposits with credit
institutions 273 487 1,302
Net investment into deposits with credit institutions (33) (355) (393)
Interest received 25 17 51
---------------------------------------------------------- ----- --------------- -------------- ------------------
Net cash used in investing activities (199) (523) (863)
---------------------------------------------------------- ----- --------------- -------------- ------------------
Cash flow from financing activities
Proceeds from issue of interest-bearing liabilities and
drawdowns on other borrowings 330 686 648
Repayment of interest-bearing liabilities and other
borrowings (473) (272) (578)
Principal repayment of lease liabilities (61) (59) (126)
Repayment of interest on lease liabilities (24) (27) (54)
Interest paid (45) (37) (103)
(Payments)/receipts on settlement of hedging instruments (10) (3) 4
Dividends paid(1) (52) (110) (175)
Dividends paid to non-controlling interests (1) - (1)
---------------------------------------------------------- ----- --------------- -------------- ------------------
Net cash (used in)/generated from financing activities (336) 178 (385)
---------------------------------------------------------- ----- --------------- -------------- ------------------
v
Net (decrease)/ increase in cash and cash equivalents (53) 585 230
Cash and cash equivalents at the beginning of period 1,705 1,451 1,451
Effect of exchange rate changes (54) 58 24
---------------------------------------------------------- ----- --------------- -------------- ------------------
Cash and cash equivalents at end of period(2) 14 1,598 2,094 1,705
---------------------------------------------------------- ----- --------------- -------------- ------------------
1. Balances have been restated for a gross up between other
revenue (other non-cash) and financial expense in relation
to the remeasurement of imputed revenue and interest in
respect of interest-free refundable accommodation deposits
received by the Group as payment for aged care units in
Bupa Villages and Aged Care - Australia. Refer to Note
1.4 for further details. Dividends paid of GBP175m for
year ended 31 December 2020 have been reclassified from
net cash used in investing activities to net cash used
in financing activities.
2. Includes cash balances classified as held for sale of GBP3m
(HY 2020: GBP252m; FY 2020: GBPnil) and bank overdrafts
of GBP1m (HY 2020: GBP1m; FY 2020: GBP1m) which are not
considered as a component of cash and cash equivalents
within Note 14.
Bupa Finance plc
Condensed Consolidated Statement of Changes in Equity
(unaudited)
for six months ended 30 June 2021
Total
attributable
to
shareholder Equity
Income Cash Foreign of attributable
Property and flow exchange Bupa to
revaluation expenditure hedge translation Finance non-controlling Total
reserve reserve reserve(1) reserve plc interests equity
For six months
ended
30 June 2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ------------ ------------ ------------ ------------- ------------- ---------------- --------
Balance as at 1
January 2021 699 5,542 21 266 6,528 18 6,546
Profit for the
financial
period - 219 - - 219 1 220
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 (12) (3) - (130) (145) (1) (146)
Net gain on hedge
of net
investment
in overseas
subsidiary
companies - - - 46 46 - 46
Change in fair
value
of financial
investments
through other
comprehensive
income - 2 - - 2 - 2
Share of other
comprehensive
income of equity
accounted
investments - 7 - - 7 - 7
Change in cash
flow
hedge reserve(1) - - (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) (157) (191) (1) (192)
------------------ ------------ ------------ ------------ ------------- ------------- ---------------- --------
Total
comprehensive
(expense)/income
for the period (20) 226 (21) (157) 28 - 28
------------------ ------------ ------------ ------------ ------------- ------------- ---------------- --------
Dividends to
equity
holders of the
company - (52) - - (52) - (52)
Dividends to
non-controlling
interests - - - - - (1) (1)
------------------ ------------ ------------ ------------ ------------- ------------- ---------------- --------
Balance as at 30
June 2021 679 5,716 - 109 6,504 17 6,521
------------------ ------------ ------------ ------------ ------------- ------------- ---------------- --------
Share capital at
beginning and
end
of period 200
------------------ ------------ ------------ ------------ ------------- ------------- ---------------- --------
Total equity 6,721
------------------ ------------ ------------ ------------ ------------- ------------- ---------------- --------
1. Change in cash flow hedge reserve includes a correction
of GBP(21m) in relation to amounts arising on the hedging
of acquisitions that should have been reallocated to goodwill
(GBP20m) or investments in associates (GBP1m) on initial
application of IFRS 9 Financial Instruments.
Total
attributable
to
shareholder Equity
Income Cash Foreign of attributable
Property and flow exchange Bupa to
revaluation expenditure hedge translation Finance non-controlling Total
reserve reserve reserve reserve plc interests equity
For year ended 31 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
December 2020
------------------ ------------- ------------- --------- ------------- -------------- ---------------- --------
Balance as at 1
January 2020 692 5,310 21 237 6,260 17 6,277
Profit for the
financial
period - 383 - - 383 2 385
Other
comprehensive
income/(expense)
Unrealised loss
on revaluation
of
property (5) - - - (5) - (5)
Realised
revaluation
profit on
disposal
of property (8) 8 - - - - -
Remeasurement
loss
on pension
schemes - (5) - - (5) - (5)
Foreign exchange
translation
differences
on goodwill - - - 63 63 - 63
Other foreign
exchange
translation
differences 16 (1) - 27 42 - 42
Net loss on hedge
of net
investment
in overseas
subsidiary
companies - - - (62) (62) - (62)
Change in fair
value
of financial
investments
through other
comprehensive
income - 7 - - 7 - 7
Share of other
comprehensive
income of equity
accounted
investments - 13 - - 13 - 13
Taxation credit
on income and
expense
recognised
directly
in other
comprehensive
income 4 2 - 1 7 - 7
------------------ ------------- ------------- --------- ------------- -------------- ---------------- --------
Other
comprehensive
income for the
period,
net of taxation 7 24 - 29 60 - 60
------------------ ------------- ------------- --------- ------------- -------------- ---------------- --------
Total
comprehensive
income for the
period 7 407 - 29 443 2 445
------------------ ------------- ------------- --------- ------------- -------------- ---------------- --------
Dividends to
equity
holders of the
company - (175) - - (175) - (175)
Dividends to
non-controlling
interests - - - - - (1) (1)
------------------ ------------- ------------- --------- ------------- -------------- ---------------- --------
Balance as at 31
December 2020 699 5,542 21 266 6,528 18 6,546
------------------ ------------- ------------- --------- ------------- -------------- ---------------- --------
Share capital at
beginning and
end
of period 200
------------------ ------------- ------------- --------- ------------- -------------- ---------------- --------
Total equity 6,746
------------------ ------------- ------------- --------- ------------- -------------- ---------------- --------
Total
attributable
to
shareholder Equity
Income Cash Foreign of attributable
Property and flow exchange Bupa to
revaluation expenditure hedge translation Finance non-controlling Total
reserve reserve reserve reserve plc interests equity
------------------ ------------- ------------- --------- ------------- -------------- ---------------- --------
For six months
ended
30 June 2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ------------- ------------- --------- ------------- -------------- ---------------- --------
Balance as at 1
January 2020 692 5,310 21 237 6,260 17 6,277
Profit for the
financial
period - 145 - - 145 1 146
Other
comprehensive
income/(expense)
Unrealised loss
on revaluation
of
property (2) - - - (2) - (2)
Foreign exchange
translation
differences
on goodwill
(restated)(1) - - - 74 74 - 74
Other foreign
exchange
translation
differences
(restated)(1) 15 2 - 158 175 - 175
Net loss on hedge
of net
investment
in overseas
subsidiary
companies - - - (68) (68) - (68)
Change in fair
value
of financial
investments
through other
comprehensive
income - 1 - - 1 - 1
Other
comprehensive
income for the
period,
net of taxation 13 3 - 164 180 - 180
------------------ ------------- ------------- --------- ------------- -------------- ---------------- --------
Total
comprehensive
income for the
period 13 148 - 164 325 1 326
------------------ ------------- ------------- --------- ------------- -------------- ---------------- --------
Dividends to
equity
holders of the
company - (110) - - (110) - (110)
Balance as at 30
June 2020 705 5,348 21 401 6,475 18 6,493
------------------ ------------- ------------- --------- ------------- -------------- ---------------- --------
Share capital at
beginning and
end
of period 200
------------------ ------------- ------------- --------- ------------- -------------- ---------------- --------
Total equity 6,693
------------------ ------------- ------------- --------- ------------- -------------- ---------------- --------
1. Balances have been restated due to the IFRS Interpretations
Committee decision in relation to Multiple Tax Consequences
of Recovering an Asset. Refer to Note 1.4 for further details.
Notes 1-19 form part of these Condensed Consolidated Financial
Statements.
Bupa Finance plc
Notes to the Condensed Consolidated Financial Statements
(unaudited)
for six months ended 30 June 2021
1 Financial information and 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 2021 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, and should be read in conjunction with the
annual financial statements for the year ended 31 December 2020,
which have been prepared in accordance with international
accounting standards in conformity of the Companies Act 2006 and in
accordance with International Financial Reporting Standards
('IFRS') adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union. The Group's change, on 1 January
2021, from IFRS as adopted in the European Union, to UK adopted
IFRS, was a change in accounting framework, in line with the
requirements of UK company law, not a change in accounting policy.
There was no impact on recognition, measurement or disclosure from
this change in framework. 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
2020.
The interim financial statements were approved by the Board of
Directors of Bupa Finance plc on 4 August 2021.
The financial information contained in these interim results
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 2020
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 reasonably possible severe scenarios including
more onerous COVID-19 outcomes and associated broader economic
impacts. Under such scenarios, significant short-term reductions in
profitability arise, however the Group would still remain within
its risk appetites for regulatory solvency and liquidity. The Group
has access to a GBP800m revolving credit facility ('RCF') in order
to meet liquidity needs. The RCF was drawn down by GBP290m at 30
June 2021 (31 December 2020: undrawn, 30 June 2020: undrawn) in
order to meet liquidity needs. Additional management actions would
allow the downside impact to be further mitigated by reducing
expenditure, obtaining additional funding or divesting investments
or businesses. Therefore the Directors do not consider that the
scenarios considered change the conclusion of the Group's going
concern assessment.
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 2021 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 2021 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.
Key areas of estimation as well as key areas of judgement,
including areas that have been recognised as particularly sensitive
to the impact of COVID-19, are set out below. Further detail on any
judgements taken are included in the related notes.
1.3.1 Estimates
Goodwill and intangible assets
Goodwill and intangible assets are recognised on business
combinations and are tested for impairment on an annual basis, or
where there are indicators of impairment. The key assumptions
within this process include the discount rate, terminal growth rate
and the forecast cash flows; which are key sources of estimation
uncertainty. At 30 June 2021, all CGUs and intangible assets with
an indefinite useful life were reviewed for indicators of
impairment. Whilst there were no indicators of impairment
identified, goodwill impairment tests were performed for CGUs which
had limited headroom at 31 December 2020. This resulted in no
impairment. The outcome of goodwill impairment test reviews and
sensitivities to reasonably possible changes in assumptions are
included in Note 7.
Property valuations
The Group has a significant portfolio of care home, hospital and
office properties. Significant assumptions for freehold properties
include average occupancy and capitalisation rates, whereas for
investment property key assumptions include discount and capital
growth rates. Further details of the significant assumptions are
included in Notes 8 and 9.
Provisions arising from insurance contracts
Estimates included in the provisions arising from insurance
contracts include expected claims payments and expenses required to
settle existing insurance contract obligations. 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.
During the course of the COVID-19 pandemic government
restrictions across many of our markets affected insurance
customers' ability to access treatment in private healthcare
facilities and make claims, particularly for elective procedures. A
deferred claim provision is established on a best estimate basis
(plus a risk margin) for these claims where regulatory or other
public commitments give rise to a constructive obligation to fund
the deferred medical service, even if the service were to postdate
a customer's contract period. The key assumption is the estimated
cost of deferred claims that are expected to rebound. Further
details of the reserving approach are included in Note 17.
1.3.2 Judgements
Impact of COVID-19 on valuations
The Group has made a number of key judgements in assessing the
longer-term impacts of COVID-19 on the business. This notably
includes judgements on the timing and extent of the recovery of the
provision and aged-care businesses over the medium term from the
impacts of COVID-19 as part of the cash flow forecasts used in
goodwill impairment testing. Further details are included in Note
7.
In addition, significant judgements have been made in
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. These judgements
are used in the calculation of the deferred claims provision in the
Australian health insurance business, the return of premium
provision in the UK PMI business and to perform liability adequacy
testing to ensure that the unearned premium provisions held across
the insurance businesses are sufficient to meet expected claims and
administrative expenses. Further details are included in Note
17.
1.4 Restatements
1.4.1 Refundable Accommodation Deposits ('RADs')
The Group receives interest-free RADs in respect of payments for
aged care units in Bupa Villages and Aged Care - Australia. Revenue
is recognised for the imputed interest on RADs, reflecting the
Group's position as lessor. The Group has determined that the use
of the Maximum Permissible Interest Rate ('MPIR') is most
appropriate to determine the imputed revenue and interest amounts.
The MPIR is a rate set by the Australian Government and is used to
calculate the Daily Accommodation Payment to applicable residents.
Previously the Group used the overnight funding rate to determine
imputed revenue and interest.
The impact of this change in measurement is shown in the table
below. Comparative periods have been restated for the change.
For six For six For year
months ended months ended ended
30 June 30 June 31 December
2021 2020 2020
GBPm GBPm GBPm
------------------------------- -------------- -------------- -------------
Other revenue 10 13 24
Financial expense (10) (13) (24)
------------------------------- -------------- -------------- -------------
Total impact on profit before
tax - - -
------------------------------- -------------- -------------- -------------
1.4.2 IFRS Interpretations Committee decision 'Multiple Tax
Consequences of Recovering an Asset (IAS 12 Income Taxes)'
In April 2020, the IFRS Interpretations Committee ('IFRS IC')
published its final agenda decision 'Multiple Tax Consequences of
Recovering an Asset (IAS 12 Income Taxes)'. The agenda item
considered how an entity accounts for deferred taxes on an asset
that has two distinct taxation consequences over its life which
cannot be offset (taxable economic benefits from use and capital
gains on disposal or expiry). The IFRS IC concluded that in these
circumstances an entity identifies separate temporary differences
(and deferred taxes) that reflect the distinct and separate
taxation consequences of recovering the asset's carrying
amount.
Previously, the Group measured deferred taxes by considering the
use and disposal of the asset as one simultaneous manner of
recovering the carrying amount of the bed licences held in Bupa
Villages and Aged Care - Australia . Taking into account the IFRS
IC decision, the Group amended its policy to take into account the
multiple consequences of recovery. This policy change has been
implemented on a retrospective basis.
The change in accounting policy was implemented from 31 December
2020 and the impacts for the 30 June 2020 comparative reporting
period and the beginning of the earliest period presented are shown
below:
30 June 2020 1 January 2020
GBPm GBPm
-------------------------------- ------------- ---------------
Goodwill and intangible assets 29 27
Deferred taxation liabilities (29) (27)
--------------------------------- ------------- ---------------
Total impact on net assets - -
--------------------------------- ------------- ---------------
The movement of GBP2m in the above balances relates to foreign
exchange differences. This has led to a restatement of 'Foreign
exchange translation differences on goodwill' of GBP2m and 'Other
foreign exchange translation differences' of GBP(2)m in both the
Condensed Consolidated Statement of Comprehensive Income and
Condensed Consolidated Statement of Changes in Equity for the
period ended 30 June 2020.
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. 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. It is expected that the simplified premium allocation
approach option will be available for the majority of the Group's
insurance contracts, so a significant change in the measurement
basis is not anticipated. The presentation and disclosure
requirements of IFRS 17 will, however, differ considerably compared
to the current approach.
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 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
2021.
1.6 Foreign exchange
The following significant exchange rates applied during the
period:
Average rate Closing rate
----------------------------------------- -----------------------------------------
At 30 June At 31 December At 30 June At 30 June At 31 December At 30 June
2021 2020 2020 2021 2020 2020
-------------------- ----------- --------------- ----------- ----------- --------------- -----------
Australian dollar 1.80 1.86 1.92 1.84 1.77 1.80
Brazilian real 7.48 6.61 6.17 6.88 7.10 6.72
Chilean peso 1,000.12 1,015.49 1,024.77 1,013.71 971.08 1,016.91
Danish krone 8.57 8.38 8.54 8.66 8.33 8.22
Euro 1.15 1.12 1.14 1.16 1.12 1.10
Hong Kong dollar 10.78 9.96 9.79 10.72 10.60 9.59
Mexican peso 28.02 27.53 27.19 27.52 27.19 28.49
New Zealand dollar 1.94 1.97 2.01 1.98 1.90 1.92
Polish zloty 5.23 4.99 5.04 5.27 5.10 4.90
Turkish lira 10.98 9.03 8.16 12.02 10.17 8.49
US dollar 1.39 1.28 1.26 1.38 1.37 1.24
-------------------- ----------- --------------- ----------- ----------- --------------- -----------
1.7 Events occurring after the reporting period
On 4 August 2021, the Group completed the sale of its 70% stake
in Ginemed, a provision business in Spain held for sale as at 30
June 2021. There was no material gain or loss on disposal from the
30 June 2021 carrying value.
2 Operating segments
The organisational structure of the Group is managed through
three Market Units based on geographic locations and customers:
Australia and New Zealand; 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 Hong Kong, Bupa China and
the Group's associate investments, Bupa Arabia and Max Bupa are
reported within Other businesses. The segmental disclosures below
are reported consistently with the way the business is managed and
reported internally.
With effect from 1 July 2021, Bupa Hong Kong has been
incorporated into the Australia and New Zealand Market Unit to form
Bupa Asia Pacific. The 2021 Annual Report will reflect this
reporting change and 2020 balances will be restated, where
applicable.
Reportable Segments Service and Products
-------------------------- ------------------------------------------------------------------------------------------
Australia and New Zealand Bupa Health Insurance: Domestic health insurance and 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 and respite care.
Bupa Villages and Aged Care - New Zealand: Nursing, residential, respite care and
residential
villages.
-------------------------- ------------------------------------------------------------------------------------------
Europe and Latin America Sanitas Seguros: Health insurance and related 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 A cıbadem Sigorta: Domestic health insurance in Turkey.
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 and UK Bupa UK Insurance: Domestic health insurance, 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.
-------------------------- ------------------------------------------------------------------------------------------
Other businesses Bupa Hong Kong: Domestic health insurance, primary healthcare and day care clinics
including
diagnostics.
Bupa China: Clinical services.
Associates: Bupa Arabia (Kingdom of Saudi Arabia) and Max Bupa (India): Health insurance.
-------------------------- ------------------------------------------------------------------------------------------
A key performance measure of operating segments utilised by the
Group is underlying profit. This alternative performance measure is
more relevant as it distinguishes underlying profit from other
constituents of the IFRS reported profit before taxation not
directly related to the trading performance of the business.
Underlying profit
The following items are excluded from underlying profit:
- Impairment of intangible assets and goodwill arising on business combinations - impairment
reviews are performed at least annually. Goodwill 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. Includes unrealised gains or losses on investment properties, deficit
on revaluations and property impairment losses.
- Realised and unrealised foreign exchange gains/losses - short-term fluctuations outside of
management control, which would distort underlying trading performance.
- Gains/losses on return-seeking assets, net of hedging - fluctuations on investments that are
not considered to be directly related to underlying trading performance.
- 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.
Australia Europe
and New and Latin Bupa Global Other
Zealand America and UK businesses Total
For six months ended 30
June 2021 GBPm GBPm GBPm GBPm GBPm
------------------------------------ ---------- ----------- ------------ ------------ -------
(i) Revenues
Gross insurance premiums 1,968 1,341 1,146 178 4,633
Premiums ceded to reinsurers - (9) (36) (2) (47)
Internal reinsurance - (1) 26 (25) -
------------------------------------ ---------- ----------- ------------ ------------ -------
Net insurance premiums earned 1,968 1,331 1,136 151 4,586
Care, health and other customer
contract revenue 558 681 519 79 1,837
Other revenue 23 4 5 2 34
Total revenues for reportable
segments 2,549 2,016 1,660 232 6,457
------------------------------------ ---------- ----------- ------------ ------------ -------
Consolidated total revenues 6,457
------------------------------------ ---------- ----------- ------------ ------------ -------
(ii) Segmental result
Underlying profit for reportable
segments 144 79 16 27 266
Central expenses and net
interest margin (28)
-------
Underlying profit for reportable
segments 238
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(1) 7 - 2 - 9
Net property revaluation
gain 7 - - - 7
Realised and unrealised
FX gain - 1 8 - 9
Other Market Unit non-underlying
items(2) - (3) 34 (1) 30
Gain on return-seeking assets,
net of hedging 3
Total non-underlying items 57
------------------------------------ ---------- ----------- ------------ ------------ -------
Consolidated profit before
taxation expense 295
------------------------------------ ---------- ----------- ------------ ------------ -------
1. Includes GBP7m in Australia and New Zealand, which includes
a GBP5m gain on sale of the rehabilitation business in
New Zealand, and a GBP2m gain in Bupa Global and UK.
2. GBP34m within the Bupa Global and UK segment includes a
GBP39m gain on the acquisition of the membership and business
of CS Healthcare (see Note 18) and restructuring costs.
Australia Europe
and New and Bupa
Zealand Latin Global Other Total
restated(1) America and UK businesses restated(1)
For six months ended 30
June 2020 GBPm GBPm GBPm GBPm GBPm
--------------------------------- ------------- --------- -------- ------------ -------------
(i) Revenues
Gross insurance premiums 1,756 1,326 1,108 197 4,387
Premiums ceded to reinsurers - (11) (34) (2) (47)
Internal reinsurance - - 24 (24) -
--------------------------------- ------------- --------- -------- ------------ -------------
Net insurance premiums
earned 1,756 1,315 1,098 171 4,340
Care, health, and other
customer contract revenue 459 510 430 68 1,467
Other revenue(1) 36 2 4 4 46
Total revenues for reportable
segments 2,251 1,827 1,532 243 5,853
--------------------------------- ------------- --------- -------- ------------ -------------
Consolidated total revenues 5,583
--------------------------------- ------------- --------- -------- ------------ -------------
(ii) Segmental result
Underlying profit for
reportable segments 73 85 26 35 219
Central expenses and net
interest margin(1) (41)
-------------
Underlying profit for
reportable segments 178
Non-underlying items:
Net loss on disposal of
businesses and transaction
costs on business combinations - (3) (2) - (5)
Net property revaluation
gain 10 - - - 10
Realised and unrealised
FX gain - 8 5 1 14
Loss on return-seeking
assets, net of hedging (5)
Group non-underlying items (1)
-------------
Total non-underlying items 13
--------------------------------- ------------- --------- -------- ------------ -------------
Consolidated profit before
taxation expense 191
--------------------------------- ------------- --------- -------- ------------ -------------
1. Balances have been restated for a gross up between other
revenue and financial expense (included within central
expenses and net interest margin) in relation to the remeasurement
of imputed revenue and interest in respect of interest-free
refundable accommodation deposits received by the Group
as payment for aged care units in Bupa Villages and Aged
Care - Australia. Refer to Note 1.4 for further details.
Australia Europe
and New and Bupa
Zealand Latin Global Other Total
restated(1) America and UK businesses restated(1)
For year ended 31 December
2020 GBPm GBPm GBPm GBPm GBPm
(i) Revenues
Gross insurance premiums 3,668 2,658 2,200 382 8,908
Premiums ceded to reinsurers - (24) (68) (3) (95)
Internal reinsurance - - 48 (48) -
------------------------------------ ------------- --------- -------- ------------ -------------
Net insurance premiums
earned 3,668 2,634 2,180 331 8,813
Care, health and other
customer contract revenue 1,023 1,124 932 151 3,230
Other revenue(1) 70 7 10 12 99
Total revenues for reportable
segments 4,761 3,765 3,122 494 12,142
------------------------------------ ------------- --------- -------- ------------ -------------
Consolidated total revenues 12,142
------------------------------------ ------------- --------- -------- ------------ -------------
(ii) Segmental result
Underlying profit for
reportable segments 161 207 122 63 553
Central expenses and net
interest margin(1) (73)
-------------
Underlying profit for
reportable segments 480
Non-underlying items:
Impairments of intangible
assets and goodwill arising
on business combinations - (1) - (11) (12)
Net gain/(loss) on disposal
of businesses and transaction
costs on business combinations(2) - 26 (27) - (1)
Net property revaluation
gain/(loss) 30 - (4) - 26
Realised and unrealised
FX loss - - (2) - (2)
Other Market Unit non-underlying
items - - (7) - (7)
Group non-underlying items 3
Gain on return-seeking
assets, net of hedging 15
-------------
Total non-underlying items 22
------------------------------------ ------------- --------- -------- ------------ -------------
Consolidated profit before
taxation expense 502
------------------------------------ ------------- --------- -------- ------------ -------------
1. Balances have been restated for a gross up between other revenue and financial expense (included
within central expenses and net interest margin) in relation to the remeasurement of imputed
revenue and interest in respect of interest-free refundable accommodation deposits received
by the Group as payment for aged care units in Bupa Villages and Aged Care - Australia. Refer
to Note 1.4 for further details.
2. Net loss on disposal of businesses and transaction costs on business combinations includes
GBP26m relating to the reclassification of a provision business in the Europe and Latin America
segment out of held for sale and GBP26m in Bupa Global and UK relating to ongoing completion
costs in respect of the disposal of UK care homes.
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 Net
customer insurance
contract premiums Other Total
For six months ended 30 June revenue earned revenue revenues
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
------------------------------ ----------- ----------- --------- ----------
Australia and New Zealand 558 1,968 23 2,549
------------------------------ ----------- ----------- --------- ----------
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
------------------------------ ----------- ----------- --------- ----------
Bupa Hong Kong 79 151 - 230
Other - - 2 2
------------------------------ ----------- ----------- --------- ----------
Other businesses 79 151 2 232
------------------------------ ----------- ----------- --------- ----------
Consolidated total revenues 1,837 4,586 34 6,457
------------------------------ ----------- ----------- --------- ----------
Care,
health
and other Net
customer insurance Other
contract premiums revenue Total
For six months ended 30 June revenue earned restated(1) revenues
2020 GBPm GBPm GBPm GBPm
------------------------------ ----------- ----------- ------------- ----------
Bupa Health Insurance 3 1,756 1 1,760
Bupa Health Services 239 - 12 251
Bupa Villages and Aged Care
- Australia(1) 149 - 16 165
Bupa Villages and Aged Care
- New Zealand 68 - 7 75
------------------------------ ----------- ----------- ------------- ----------
Australia and New Zealand 459 1,756 36 2,251
------------------------------ ----------- ----------- ------------- ----------
Sanitas Seguros 4 592 - 596
Sanitas Dental 32 32 1 65
Sanitas Hospitales and New
Services 98 - - 98
Sanitas Mayores 70 - - 70
LuxMed 192 5 - 197
Bupa Acıbadem Sigorta - 104 - 104
Bupa Chile 109 342 1 452
Care Plus 1 91 - 92
Bupa Mexico - 7 - 7
Bupa Global Latin America 4 142 - 146
------------------------------ ----------- ----------- ------------- ----------
Europe and Latin America 510 1,315 2 1,827
------------------------------ ----------- ----------- ------------- ----------
Bupa UK Insurance 7 719 2 728
Bupa Dental Care UK 166 - - 166
Bupa Care Services 192 - - 192
Bupa Health Services 65 - - 65
Bupa Global - 379 2 381
------------------------------ ----------- ----------- ------------- ----------
Bupa Global and UK 430 1,098 4 1,532
------------------------------ ----------- ----------- ------------- ----------
Bupa Hong Kong 68 171 - 239
Other - - 4 4
------------------------------ ----------- ----------- ------------- ----------
Other businesses 68 171 4 243
------------------------------ ----------- ----------- ------------- ----------
Consolidated total revenues 1,467 4,340 46 5,853
------------------------------ ----------- ----------- ------------- ----------
1. Balances have been restated for a gross up between other
revenue and financial expense in relation to the remeasurement
of imputed revenue and interest in respect of interest-free
refundable accommodation deposits received by the Group
as payment for aged care units in Bupa Villages and Aged
Care - Australia. Refer to Note 1.4 for further details.
Care,
health
and other Net
customer insurance Other
contract premiums revenue Total
For year ended 31 December revenue earned restated(1) revenues
2020 GBPm GBPm GBPm GBPm
----------------------------- ----------- ----------- ------------- ----------
Bupa Health Insurance 6 3,668 - 3,674
Bupa Health Services 562 - 23 585
Bupa Villages and Aged Care
- Australia(1) 313 - 35 348
Bupa Villages and Aged Care
- New Zealand 142 - 12 154
----------------------------- ----------- ----------- ------------- ----------
Australia and New Zealand 1,023 3,668 70 4,761
----------------------------- ----------- ----------- ------------- ----------
Sanitas Seguros 8 1,203 1 1,212
Sanitas Dental 82 66 2 150
Sanitas Hospitales and New
Services 220 - 1 221
Sanitas Mayores 136 - - 136
LuxMed 407 12 1 420
Bupa Acıbadem Sigorta - 179 - 179
Bupa Chile 259 687 1 947
Care Plus 1 176 - 177
Bupa Mexico - 15 - 15
Bupa Global Latin America 11 296 1 308
----------------------------- ----------- ----------- ------------- ----------
Europe and Latin America 1,124 2,634 7 3,765
----------------------------- ----------- ----------- ------------- ----------
Bupa UK Insurance 16 1,430 4 1,450
Bupa Dental Care UK 389 - - 389
Bupa Care Services 389 - - 389
Bupa Health Services 138 - 1 139
Bupa Global - 750 5 755
----------------------------- ----------- ----------- ------------- ----------
Bupa Global and UK 932 2,180 10 3,122
----------------------------- ----------- ----------- ------------- ----------
Bupa Hong Kong 151 331 6 488
Other - - 6 6
----------------------------- ----------- ----------- ------------- ----------
Other businesses 151 331 12 494
----------------------------- ----------- ----------- ------------- ----------
Consolidated total revenues 3,230 8,813 99 12,142
----------------------------- ----------- ----------- ------------- ----------
1. Balances have been restated for a gross up between other
revenue and financial expense in relation to the remeasurement
of imputed revenue and interest in respect of interest-free
refundable accommodation deposits received by the Group
as payment for aged care units in Bupa Villages and Aged
Care - Australia. Refer to Note 1.4 for further details.
4 Other income and charges
For six months For six months For year
ended ended ended
30 June 2021 30 June 2020 31 December 2020
GBPm GBPm GBPm
---------------------------------------------------------------- --------------- --------------- ------------------
Gain on acquisition of businesses(1) 41 - -
Net gain/(loss) on disposal and restructuring of businesses(2) 9 (5) (1)
(Deficit)/surplus on revaluation of property (4) - 1
Net gain on disposal of property, plant and equipment - - 1
---------------------------------------------------------------- --------------- --------------- ------------------
Total other income and charges 46 (5) 1
---------------------------------------------------------------- --------------- --------------- ------------------
1. Gain on acquisition of businesses includes a GBP41m gain
in relation to the acquisition of the membership and business
of CS Healthcare (see Note 18). This is gross of related
transaction costs of GBP2m.
2. Net gain/(loss) on disposal and restructuring of businesses
includes GBP7m in Australia and New Zealand, which includes
a GBP5m gain on sale of the rehabilitation business in
New Zealand, and a GBP2m gain in Bupa Global and UK. (HY
2020: GBP3m loss in respect of a provision business in
the Europe and Latin America segment; FY 2020: GBP26m gain
relating to the reclassification of a provision business
in the Europe and Latin America segment out of held for
sale and losses of GBP26m in Bupa Global and UK relating
to ongoing completion costs in respect of the disposal
of UK care homes).
5 Financial income and expense
Financial income
For six months For year
For six months ended ended ended
30 June 2021 30 June 2020 31 December 2020
GBPm GBPm GBPm
---------------------------------------------------------- --------------------- --------------- ------------------
Interest income:
Investments at fair value through profit or loss 20 12 21
Investments at fair value through other comprehensive
income 1 - 2
Investments at amortised cost 10 15 28
Net realised gains/(losses):
Net realised gains/(losses) on financial investments at
fair value through profit or loss 2 (3) (3)
Net realised gains on financial investments designated
at fair value through other comprehensive
income 4 2 5
Net increase in fair value:
Investments at fair value through profit or loss 2 - 13
Investment property 11 11 25
Net foreign exchange translation (losses)/gains (3) 2 1
---------------------------------------------------------- --------------------- --------------- ------------------
Total financial income 47 39 92
---------------------------------------------------------- --------------------- --------------- ------------------
Included within financial income is a net gain, after hedging,
on the Group's return-seeking asset portfolio of GBP3m (HY 2020:
net loss of GBP5m; FY 2020: net gain of GBP15m).
Financial expense
For six months For year
For six months ended ended
ended 30 June 2020 31 December
30 June 2021 restated(1) 2020
restated(1)
GBPm GBPm GBPm
-------------------------------- ----------------- --------------- -------------
Interest expense on financial
liabilities at amortised cost 51 49 98
Finance charges in respect
of leases and restoration
provisions 24 28 55
Other financial expenses(1) 12 14 27
-------------------------------- ----------------- --------------- -------------
Total financial expenses 87 91 180
-------------------------------- ----------------- --------------- -------------
1. Balances have been restated for a remeasurement of imputed
interest in respect of interest-free refundable accommodation
deposits received by the Group in respect of payment for
aged care units in Bupa Villages and Aged Care - Australia.
Refer to Note 1.4 for further details.
Other financial expenses for the six months ended 30 June 2021
includes GBP10m (HY 2020: GBP13m; FY 2020: GBP24m) 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 25% (HY
2020: 24%; FY 2020: 23%), 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 corporate income
taxation. The revaluation of UK deferred taxation balances
following the change in the enacted UK taxation rate from 19% to
25% did not have a material impact on the effective taxation rate
for the period.
7 Goodwill and intangible assets
At 30 June
At 30 June At 31 December 2020
2021 2020 restated(1)
GBPm GBPm GBPm
----------------------------------------- ----------- --------------- -------------
Net book value at beginning of period 3,820 3,786 3,786
Assets arising on business combinations 37 13 11
Additions 34 114 43
Disposals (3) (10) -
Amortisation for the period (72) (141) (70)
Impairments (3) (18) -
Transfer to assets held for sale (68) - -
Other(2) (20) 8 6
Foreign exchange (99) 68 95
----------------------------------------- ----------- --------------- -------------
Net book value at end of period 3,626 3,820 3,871
----------------------------------------- ----------- --------------- -------------
1. Balances have been restated due to the IFRS Interpretations
Committee decision in relation to Multiple Tax Consequences
of Recovering an Asset. Refer to Note 1.4 for further details.
2. Other includes a GBP20m movement in goodwill in relation
to amounts arising on the hedging of acquisitions that should
have been allocated from the cash flow hedge reserve to
goodwill on initial application of IFRS 9 Financial Instruments.
The net book value of intangible assets comprises:
At 30 June
At 30 June At 31 December 2020
2021 2020 restated(1)
GBPm GBPm GBPm
--------------------------------- ----------- --------------- -------------
Goodwill 2,499 2,642 2,655
Computer software 298 311 284
Brands and trademarks 149 171 176
Customer relationships 512 515 552
Other(2) 168 181 204
--------------------------------- ----------- --------------- -------------
Net book value at end of period 3,626 3,820 3,871
--------------------------------- ----------- --------------- -------------
1. Balances have been restated due to the IFRS Interpretations
Committee decision in relation to Multiple Tax Consequences
of Recovering an Asset. Refer to Note 1.4 for further details.
2. Predominantly comprises bed licences, distribution networks
and licences to operate care homes.
Intangible assets of GBP3,626m (HY 2020: GBP3,871m; FY 2020:
GBP3,820m) includes GBP829m (HY 2020: GBP932m; FY 2020: GBP867m)
attributable to other intangible assets arising on business
combinations. This comprises customer relationships, brands and
trademarks and other in the above table.
Computer software assets of GBP298m (HY 2020: GBP284m; FY 2020:
GBP311m) includes GBP236m (HY 2020: GBP224m; FY 2020: GBP252m)
attributable to capitalised internal development costs. GBP29m of
costs (HY 2020: GBP34m; FY 2020: GBP89m) were capitalised in the
period.
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. At 30 June
2021, all CGUs and intangible assets with an indefinite useful life
were reviewed for indicators of impairment. Whilst there were no
indicators of impairment identified, goodwill impairment tests were
performed for CGUs which had limited headroom at 31 December 2020.
This resulted in no impairment.
Goodwill by CGU is as follows:
At 30 June
At 30 June At 31 December 2020
2021 2020 restated(1)
GBPm GBPm GBPm
----------------------------------------- ----------- --------------- -------------
Australia and New Zealand
Bupa Australia Health Insurance 830 894 883
Bupa Health Services Australia 308 311 308
Bupa Villages and Aged Care - Australia 105 111 113
Europe and Latin America
Bupa Chile 148 152 146
LuxMed 233 251 260
Sanitas Seguros 46 101 102
Sanitas Mayores 21 22 22
Bupa Acıbadem Sigorta 35 41 49
Care Plus 27 19 20
Other 4 - -
Bupa Global and UK
Bupa Care Services UK 90 90 90
Bupa Dental Care UK 467 467 468
Bupa Global 68 68 68
Other 3 3 2
Other businesses
Hong Kong 114 112 124
----------------------------------------- ----------- --------------- -------------
Total 2,499 2,642 2,655
----------------------------------------- ----------- --------------- -------------
1. Balances have been restated due to the IFRS Interpretations
Committee decision in relation to Multiple Tax Consequences
of Recovering an Asset. Refer to Note 1.4 for further details.
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 costs
and operating expenses. For provision business the cash flows are
driven by available clinician hours, fee rates and operating
expenses. For UK Dental, cash flows are particularly sensitive to
the availability of dentists for the Group to recruit. Due to the
regulated nature of insurance, the cash flows of Insurance CGUs can
be impacted by the political and regulatory environment in which
the businesses operate. This is particularly the case in Bupa
Chile, where ongoing social and political changes mean that it is
harder to anticipate how the local regulatory environment might
develop.
The goodwill impairment tests have been performed using the
latest cash flow forecasts for the CGUs as at 30 June 2021. These
reflect the anticipated recovery of the provision and aged care
businesses over the medium term alongside the impacts of management
actions, such as delaying capital expenditure, that have been
implemented in the short term. These assumptions are largely
unchanged from those made at 31 December 2020. Acknowledging that
the longer term economic and social impact of COVID-19 is not yet
fully known, projecting future cash flows is inevitably judgemental
and will require periodic further review.
The tests have not indicated that an impairment of goodwill is
required for any of the CGUs. Sensitivities have been provided
below for CGUs where a reasonably possible adverse change to the
discount rate, terminal growth rate or cash flows could give rise
to an impairment in the future.
Reduction
Reduction in headroom
in headroom from Reduction
from 0.5% in headroom
0.5% reduction from
Terminal increase in terminal 10% reduction
Discount growth in discount growth in cash
Headroom rate rate rate rate flows
GBPm % % GBPm GBPm GBPm
------------------------ --------- --------- --------- ------------- ------------- ---------------
Bupa Dental Care
UK 32 7.8 2.6 (91) (79) (79)
Bupa Care Services
UK 27 6.1 2.6 (120) (108) (90)
Bupa Villages and
Aged Care - Australia 84 9.8 3.0 (38) (32) (56)
Bupa Chile 98 11.6 3.0 (49) (40) (61)
------------------------ --------- --------- --------- ------------- ------------- ---------------
Key assumptions underpinning the cash flows will differ across
the CGUs. For Bupa Dental Care UK, cash flows are highly sensitive
to the availability of dentists for the Group to recruit and an
additional 10% of average available clinician hours are assumed
during the forecast period - this level of growth rate, assuming
all other assumptions remain unchanged, is required to support the
current carrying value. For Bupa Care Services UK and Bupa Villages
and Aged Care - Australia cash flows, key drivers will be the
recovery of occupancy rates and the controlling of operating
expenses. For Bupa Chile, future cash flows are sensitive to local
regulatory approval of assumed future insurance premium rate
rises.
8 Property, plant and equipment
At 30 June At 31 December At 30 June
2021 2020 2020
GBPm GBPm GBPm
----------------------------- ----------- --------------- -----------
Net book value at beginning
of period 4,115 4,170 4,170
Assets arising on business
combinations 4 13 1
Additions 84 222 110
Transfer to assets held for
sale (67) (8) (1)
Disposals (4) (55) (2)
Revaluations (14) (4) (2)
Remeasurements 13 5 28
Depreciation charge for the
period (163) (332) (164)
Impairment loss (1) (10) -
Other (2) (1) (2)
Foreign exchange (96) 115 107
----------------------------- ----------- --------------- -----------
Net book value at end of
period 3,869 4,115 4,245
----------------------------- ----------- --------------- -----------
Property, plant and equipment are the physical assets 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. Lease 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 2021. A
review of the underlying assumptions underpinning the property
valuations as at 30 June 2021 resulted in write-downs of GBP14m in
respect of owned property (HY 2020: GBP2m, FY 2020: GBP4m).
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.
Whilst only minor impairments totalling GBP1m have been
recognised as at 30 June 2021 (HY 2020: GBPnil; FY 2020: GBP10m) in
relation to various items of property, plant and equipment, as with
other key accounting judgements, there is future uncertainty until
the full longer term economic and social impacts of COVID-19 are
fully understood.
9 Investment property
At 30 June At 31 December At 30 June
2021 2020 2020
GBPm GBPm GBPm
--------------------------------- ----------- --------------- -----------
At beginning of period 627 522 522
Additions 23 59 27
Disposals - (1) (1)
Increase in fair value 11 25 11
Reclassification from property, 1 - -
plant and equipment
Foreign exchange (25) 22 15
--------------------------------- ----------- --------------- -----------
At end of period 637 627 574
--------------------------------- ----------- --------------- -----------
Investment properties are physical assets that are not occupied
by the Group and are leased to third parties to generate rental
income. Most investment properties held by the Group relate to a
portfolio of retirement villages in Australia and New Zealand.
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, these properties are valued using
discounted cash flow projections based on reliable estimates of
future cash flows. Investment property is revalued annually with
any gain or loss arising from a change in fair value recognised in
the 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 GBP630m ( HY 2020: GBP568m, FY 2020: GBP615m ).
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. Significant assumptions used in the
valuation include:
Australia and New Zealand
---------------------------------- -------------
Discount rate 13.0% -
15.3%
Capital growth rate 0.0% - 3.5%
Provision for capital replacement 0.6% - 3.0%
Vacancy period 0 - 3 months
Turnover in apartments and 4 - 6 years
villas
---------------------------------- -------------
The sensitivity analysis below considers the impact on the year
end valuation of Level 3 investment properties and is based on a
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 GBP10m decrease GBP11m increase
Capital growth rate GBP15m increase GBP14m 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 amounts charged to other operating expenses for the period
are:
For six months For six months For year
ended ended ended
30 June 2021 30 June 2020 31 December 2020
GBPm GBPm GBPm
-------------------------------------------------------------- ---------------- ---------------- ------------------
Current service cost - - 1
Total amount charged to the Condensed Consolidated Income
Statement - - 1
-------------------------------------------------------------- ---------------- ---------------- ------------------
Amount recognised directly in other comprehensive income
The amounts charged directly to equity are:
For six months For six months For year
ended ended ended
30 June 2021 30 June 2020 31 December
GBPm GBPm 2020
GBPm
------------------------------ ---------------- ---------------- -------------
Actual return less expected
return on assets - - (6)
Loss arising from changes to
financial assumptions - - 11
Loss arising from changes to
experience assumptions - - 1
Gain arising from changes to
demographic assumptions - - (1)
------------------------------ ---------------- ---------------- -------------
Total remeasurement losses
charged directly to equity - - 5
------------------------------ ---------------- ---------------- -------------
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
2021 2020 2020
GBPm GBPm GBPm
--------------------------------------------------------------------------- ----------- --------------- -----------
Present value of funded obligations (87) (88) (79)
Fair value of scheme assets 76 77 74
--------------------------------------------------------------------------- ----------- --------------- -----------
Net recognised liabilities (11) (11) (5)
--------------------------------------------------------------------------- ----------- --------------- -----------
Represented on the Condensed Consolidated Statement of Financial Position:
Net liabilities (12) (12) (7)
Net assets 1 1 2
--------------------------------------------------------------------------- ----------- --------------- -----------
Net recognised liabilities (11) (11) (5)
--------------------------------------------------------------------------- ----------- --------------- -----------
11 Restricted assets
At 30 June At 31 December At 30 June
2021 2020 2020
GBPm GBPm GBPm
------------------------------- ----------- --------------- -----------
Non-current restricted assets 48 48 44
Current restricted assets 108 101 79
------------------------------- ----------- --------------- -----------
Total restricted assets 156 149 123
------------------------------- ----------- --------------- -----------
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 should they
crystallise. The non-current restricted assets balance of GBP48m
(HY 2020: GBP44m; FY 2020: GBP48m) 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 GBP106m (HY 2020: GBP77m; FY 2020: GBP101m) 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, as there has not been a significant increase in credit
risk since initial recognition.
The measurement of ECL reflects a probability-weighted outcome,
the time value of money and the best available forward-looking
information.
At 30 June 2021 At 31 December 2020 At 30 June 2020
------------------------ ------------------------ ------------------------
Fair Fair Fair
Carrying value value Carrying value value Carrying value value
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------------- --------------- ------- --------------- ------- --------------- -------
Fair value through profit or loss
Corporate debt securities and secured
loans 345 345 342 342 311 311
Government debt securities 40 40 47 47 49 49
Pooled investment funds 391 391 301 301 221 221
Deposits with credit institutions 1 1 1 1 1 1
Other loans 8 8 8 8 6 6
Equities 11 11 12 12 12 12
Fair value through other comprehensive
income
Corporate debt securities and secured
loans 90 90 85 85 100 100
Government debt securities 36 36 38 38 35 35
Amortised cost
Corporate debt securities and secured
loans 645 650 616 622 650 656
Government debt securities 99 101 103 106 139 141
Deposits with credit institutions 1,314 1,316 1,311 1,318 1,271 1,278
Other loans - - 1 1 1 1
---------------------------------------- --------------- ------- --------------- ------- --------------- -------
Total financial investments 2,980 2,989 2,865 2,881 2,796 2,811
---------------------------------------- --------------- ------- --------------- ------- --------------- -------
Non-current 865 870 945 951 990 998
Current 2,115 2,119 1,920 1,930 1,806 1,813
---------------------------------------- --------------- ------- --------------- ------- --------------- -------
The performance of the Group's financial investments has been
resilient during the period, largely due to the proportion invested
in high credit quality bank deposits and corporate bonds. Certain
insurance businesses in the Group also invest in smaller
return-seeking asset portfolios of bonds and loans, which has also
proven to be resilient over the period.
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 one that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived
from prices).
-- Level 3: inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
An analysis of financial investment by hierarchy level is as
follows:
Level 1 Level 2 Level 3 Total
As at 30 June 2021 GBPm GBPm GBPm GBPm
----------------------------------------------- -------- -------- -------- ------
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 541 109 - 650
Government debt securities 59 42 - 101
Deposits with credit institutions - 1,316 - 1,316
Total financial investments 882 2,078 29 2,989
----------------------------------------------- -------- -------- -------- ------
Level 1 Level 2 Level 3 Total
As at 31 December 2020 GBPm GBPm GBPm GBPm
----------------------------------------------- -------- -------- -------- ------
Fair value through profit or loss
Corporate debt securities and secured loans 36 306 - 342
Government debt securities 47 - - 47
Pooled investment funds 135 158 8 301
Deposits with credit institutions 1 - - 1
Other loans - - 8 8
Equities - - 12 12
Fair value through other comprehensive income
Corporate debt securities and secured loans 85 - - 85
Government debt securities 38 - - 38
Amortised cost
Corporate debt securities and secured loans 621 1 - 622
Government debt securities 105 1 - 106
Deposits with credit institutions - 1,318 - 1,318
Other loans - 1 - 1
----------------------------------------------- -------- -------- -------- ------
Total financial investments 1,068 1,785 28 2,881
----------------------------------------------- -------- -------- -------- ------
Level 1 Level 2 Level 3 Total
As at 30 June 2020 GBPm GBPm GBPm GBPm
----------------------------------------------- -------- -------- -------- ------
Fair value through profit or loss
Corporate debt securities and secured loans 14 297 - 311
Government debt securities 49 - - 49
Pooled investment funds 47 167 7 221
Deposits with credit institutions 1 - - 1
Other loans - - 6 6
Equities - - 12 12
Fair value through other comprehensive income
Corporate debt securities and secured loans 100 - - 100
Government debt securities 35 - - 35
Amortised cost
Corporate debt securities and secured loans 653 3 - 656
Government debt securities 140 1 - 141
Deposits with credit institutions - 1,278 - 1,278
Other loans - 1 - 1
----------------------------------------------- -------- -------- -------- ------
Total financial investments 1,039 1,747 25 2,811
----------------------------------------------- -------- -------- -------- ------
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.
GBP113m of government debt securities and corporate debt
securities and secured loans have been transferred from Level 1 to
Level 2 following a review of the level of market activity and
readily available quoted prices in those investments. In addition,
there were transfers of GBP5m from Level 2 to Level 1 and GBP1m
from Level 2 to Level 3.
There were no transfers between fair value hierarchy levels for
the period ended 30 June 2020 or the year ended 31 December
2020.
The Group currently holds Level 3 financial investments
totalling GBP29m (HY 2020: GBP25m; FY 2020: GBP28m). 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 GBP1m.
The table below shows movement in the Level 3 assets measured at
fair value:
At 30 June At 31 December At 30 June
2021 2020 2020
GBPm GBPm GBPm
------------------------------- ----------- --------------- -----------
Opening balance 28 22 22
Additions 1 6 2
Transfer between levels 1 - -
Foreign exchange (1) - 1
------------------------------- ----------- --------------- -----------
Total Level 3 assets measured
at fair value 29 28 25
------------------------------- ----------- --------------- -----------
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
2021 2020 2020
GBPm GBPm GBPm
----------------------------- ----------- --------------- -----------
Insurance debtors 1,591 1,087 1,744
Ceded insurance provisions
(see Note 17) 58 24 54
Deferred acquisitions costs 162 138 188
Medicare Rebate 68 76 74
Risk Equalisation Special
Account recoveries 15 20 9
----------------------------- ----------- --------------- -----------
Total assets arising from
insurance business 1,894 1,345 2,069
----------------------------- ----------- --------------- -----------
Non-current 10 11 12
Current 1,884 1,334 2,057
----------------------------- ----------- --------------- -----------
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
2021 2020 2020
GBPm GBPm GBPm
--------------------------------- ----------- --------------- -----------
Cash at bank and in hand 1,201 1,279 1,132
Short-term deposits 395 427 711
--------------------------------- ----------- --------------- -----------
Total cash and cash equivalents 1,596 1,706 1,843
--------------------------------- ----------- --------------- -----------
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 2020: GBP1m; FY 2020: GBP1m) that
are repayable on demand are reported within other interest bearing
liabilities (Note 16) on the Condensed Consolidated Statement of
Financial Position, although these are considered as 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
2021 2020 2020
GBPm GBPm GBPm
------------------------------------ ----------- --------------- -----------
Assets held for sale
Goodwill and intangible assets 68 - -
Property, plant and equipment 69 8 5
Financial investments - - 6
Deferred taxation assets - - 1
Inventories 6 - 6
Trade and other receivables 2 - 22
Cash and cash equivalents 3 - 252
------------------------------------ ----------- --------------- -----------
Total assets classified as
held for sale 148 8 292
------------------------------------ ----------- --------------- -----------
Liabilities associated with
assets held for sale
Other interest-bearing liabilities - - (17)
Lease liabilities (10) (1) -
Derivative liabilities (18)
Deferred taxation liabilities (4) - (2)
Trade and other payables (21) - (182)
Current taxation liabilities - - (1)
------------------------------------ ----------- --------------- -----------
Total liabilities classified
as held for sale (53) (1) (202)
------------------------------------ ----------- --------------- -----------
Net assets classified as held
for sale 95 7 90
------------------------------------ ----------- --------------- -----------
Net assets and liabilities held for sale as at 30 June 2021
comprise various care home businesses and non-operating care home
sites in Bupa Villages and Aged Care - Australia, care homes in
Sanitas Mayores and a provision business in Spain, as well as an
office building in Brazil. Net assets held for sale at 31 December
2020 comprised the rehabilitation business within Bupa Villages and
Aged Care - New Zealand as well as an office building in Brazil and
at 30 June 2020 comprised a provision business within the Europe
and Latin America segment (reclassified out of held for sale in
late 2020 following the cancellation of a planned disposal) and a
retirement village in Bupa Villages and Aged Care - New
Zealand.
16 Borrowings
At 30 June At 31 December At 30 June
2021 2020 2020
GBPm GBPm GBPm
-------------------------------------------------------------------- ----------- --------------- -----------
Subordinated liabilities
Callable subordinated perpetual guaranteed bonds - - 346
Fair value adjustment in respect of hedged interest rate risk - - 3
-------------------------------------------------------------------- ----------- --------------- -----------
Callable subordinated perpetual guaranteed bonds at carrying value - - 349
Subordinated unguaranteed bonds 1,248 1,247 1,246
-------------------------------------------------------------------- ----------- --------------- -----------
Total subordinated liabilities 1,248 1,247 1,595
-------------------------------------------------------------------- ----------- --------------- -----------
Other interest-bearing liabilities
Senior unsecured bonds 645 997 992
Fair value adjustment in respect of hedged interest rate risk (2) 12 11
Bank loans and overdrafts 385 182 168
-------------------------------------------------------------------- ----------- --------------- -----------
Total other interest-bearing liabilities 1,028 1,191 1,171
-------------------------------------------------------------------- ----------- --------------- -----------
Total borrowings 2,276 2,438 2,766
-------------------------------------------------------------------- ----------- --------------- -----------
Non-current 1,896 2,000 2,334
Current 380 438 432
-------------------------------------------------------------------- ----------- --------------- -----------
Other interest-bearing liabilities
GBP350m of senior unsecured bonds were repaid on 17 June 2021.
The Group maintains a GBP800m revolving credit facility in order to
meet liquidity needs which matures in August 2022. At 30 June 2021
the facility was drawn down by GBP290m (HY 2020 and FY 2020: fully
undrawn). The Group's GBP40m bilateral loan facility was fully
drawn down at 30 June 2021 (HY 2020 and FY 2020: fully drawn).
During the period the Group put in place a EUR30m bank facility in
Spain, maturing in May 2022 which remains fully undrawn as at 30
June 2021.
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.
Where available, fair values disclosed in the table below have been
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
corroborated by independent third parties. 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 2021 2020 At 30 June 2020
---------------------- ---------------------- ----------------------
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 1,399 - 1,399 1,424 - 1,424 1,653 - 1,653
Senior unsecured
bonds 617 47 664 983 49 1,032 967 45 1,012
Bank loans
and overdrafts - 385 385 - 182 182 - 168 168
------------------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total 2,016 432 2,448 2,407 231 2,638 2,620 213 2,833
------------------ ------ ------ ------ ------ ------ ------ ------ ------ ------
The Group does not have any Level 3 financial liabilities.
17 Provisions arising from insurance contracts
At 30 June 2021 At 31 December 2020 At 30 June 2020
--------------------------- --------------------------- ---------------------------
Re- Re- Re-
Gross insurance Net Gross insurance Net Gross insurance Net
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ------ ----------- ------ ------ ----------- ------ ------ ----------- ------
General insurance business
Provisions for unearned
premiums 2,712 (50) 2,662 2,094 (17) 2,077 2,797 (43) 2,754
Provisions for claims 1,150 (8) 1,142 1,083 (7) 1,076 1,227 (11) 1,216
Long-term business
Life insurance contract
liabilities 35 - 35 35 - 35 36 - 36
------------------------------- ------ ----------- ------ ------ ----------- ------ ------ ----------- ------
Total insurance provisions 3,897 (58) 3,839 3,212 (24) 3,188 4,060 (54) 4,006
------------------------------- ------ ----------- ------ ------ ----------- ------ ------ ----------- ------
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 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 the 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 is currently held in respect of Bupa Insurance Limited
making a commitment to pass back any exceptional financial benefits
experienced by the UK PMI business that ultimately arise as a
result of COVID-19 to eligible customers. At 30 June 2021, the
return of premium provision held is GBP40m (HY 2020 GBP111m; FY
2020: GBP145m). The reduction in the provision is impacted by Bupa
Insurance Limited announcing the payment of GBP125m to UK health
insurance customers from April 2021. At 30 June 2021 GBP38m of
these payments are still being processed, with the outstanding
amount being recognised as a creditor in other liabilities arising
from insurance business.
Provision is also made for unexpired risks when unearned
premiums, net of associated acquisition costs, are insufficient to
meet expected claims and administrative expenses. The expected cash
flows are calculated having regard only to contracts commencing
prior to or at the balance sheet date. At 30 June 2021, an
unexpired risk provision of GBP9m has been recognised (HY 2020:
GBP50m; FY 2020: GBP5m).
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 episode 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.
In setting the provisions for claims outstanding, a best
estimate is determined on an undiscounted basis with no allowance
for prudence, and then a margin of prudence is added such that
there is confidence that future claims will be met from the
provisions. 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.
A deferred claims provision of GBP180m has been recognised as at
30 June 2021 (HY 2020: GBP389m; FY 2020: GBP171m). As at 30 June
2021, the provision has been established solely 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 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.
The deferred claims provision is expected to be materially fully
utilised over the next 18 months. Related future claims experience
may differ significantly from these estimates.
18 Business combinations and disposals
A summary of material acquisitions is provided below. There have
been no material disposals in the six-month period ended 30 June
2021.
a) 2021 acquisitions
During the period the Group made acquisitions for a total
consideration of GBP17m, recognising net assets on acquisition of
GBP53m.
In January 2021, the Group acquired Vitamédica, a health
insurance provider in Mexico for a consideration of GBP16m. Net
assets of GBP12m and resulting goodwill of GBP4m were recognised on
acquisition.
In addition, the Group acquired the business and membership of
Civil Service Healthcare Society Limited ('CS Healthcare') in
January 2021 for GBPnil consideration. Intangible assets consisting
of customer relationships totalling GBP26m and other net assets
totalling GBP15m have been recognised as part of the business
combination. The resulting gain of GBP41m has been recorded as a
gain on acquisition of businesses within other income and charges
(see Note 4). This is gross of related transaction costs of
GBP2m.
The acquisition balance sheets of these acquisitions are
provisional and will be finalised during 2021.
Goodwill of GBP1m was recognised in respect of other minor
acquisitions. There was no adjustment to goodwill in respect of
prior period acquisitions.
19 Commitments and contingencies
Capital commitments
Capital expenditure for the Group contracted at 30 June 2021 but
for which no provision has been made in the financial statements
amounted to GBP108m (HY 2020: GBP158m; FY 2020: GBP112m), primarily
due to aged care facilities and retirement village project
commitments in the Australia and New Zealand Market Unit.
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, other disputes, regulatory compliance (including data
protection) and interpretation of law (including superannuation 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 2021
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 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
entity 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 2020. There have been no
changes in Directors since the publication of the Company's Annual
Report and Accounts for the year ended 31 December 2020.
By order of the Board
Martin Potkins Gareth Roberts
Director Director
4 August 2021
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 2021 (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.
What we have reviewed
The interim financial statements comprise:
-- the Condensed Consolidated Statement of Financial Position as at 30 June 2021;
-- 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.
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.
Our responsibility is to express a conclusion on the interim
financial statements in the Condensed Consolidated Half Year
Financial Statements based on our review. 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.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board 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.
PricewaterhouseCoopers LLP
Chartered Accountants
London
4 August 2021
[1] Revenues from associate businesses are excluded from
reported figures. Customer numbers and economic share of post-tax
profits from our associate businesses are included.
[2] Balances have been restated for a gross up between other
revenue and financial expense (included within central expenses and
net interest margin) in relation to the remeasurement of imputed
revenue and interest in respect of interest-free refundable
accommodation deposits received by the Group as payment for aged
care units in Bupa Villages and Aged Care Australia. Refer to Note
1.4 for further details.
[3] 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.
[4] The 2021 Solvency II capital coverage ratio is an estimate and unaudited.
[5] Our total customers as reported in 2020 Annual Report.
[6] Balances have been restated for a gross up between other
revenue and financial expense (included within central expenses and
net interest margin) in relation to the remeasurement of imputed
revenue and interest in respect of interest-free refundable
accommodation deposits received by the Group as payment for aged
care units in Bupa Villages and Aged Care - Australia. Refer to
Note 1.4 for further details.
[7] Combined Operating Ratio is an alternative performance
metric for insurance businesses. It is calculated based on incurred
claims and operating expenses divided by net earned premiums.
[8] Bupa HI Pty Ltd (Australia): based on the Solvency II
S.05.01 Quantitative Reporting Template (estimated and
unaudited).
[9] Sanitas S.A de Seguros (Spain): Prepared under local GAAP
(unaudited)
[10] Bupa Insurance Limited: based on the Solvency II S.05.01
Prudential Regulation Authority (SII) form Quantitative Reporting
Template (estimated and unaudited).
[11] Balances have been restated for a gross up between other
revenue and financial expense (included within central expenses and
net interest margin) in relation to the remeasurement of imputed
revenue and interest in respect of interest-free refundable
accommodation deposits received by the Group as payment for aged
care units in Bupa Villages and Aged Care - Australia. Refer to
Note 1.4 for further details.
[12] The 2021 Solvency II capital coverage ratio is an estimate and unaudited.
[13] Balances have been restated for a gross up between other
revenue and financial expense (included within central expenses and
net interest margin) in relation to the remeasurement of imputed
revenue and interest in respect of interest-free refundable
accommodation deposits received by the Group as payment for aged
care units in Bupa Villages and Aged Care - Australia. Refer to
Note 1.4 for further details.
[14] The Solvency II capital position, SCR and coverage ratio
represents the position of the Parent, The British United Provident
Association Limited. The 2021 Solvency II capital coverage ratio is
an estimate and unaudited.
[15] Group Specific Parameter (GSP) is substituted for the
insurance premium risk parameter in the standard formula,
reflecting the Group's own loss experience.
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August 05, 2021 02:00 ET (06:00 GMT)
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