OREANDA-NEWS. Bupa: full year statement for the year ended 31 December 2015 

STEADY PROGRESS IN CHALLENGING CONDITIONS 

o  Revenue £9.8bn, up 6% at constant exchange rates (CER); up 1% at actual exchange rates (AER)

o  Underlying profit before taxation £582.5m down 2% at CER; down 9% at AER (2014 FY: £637.8m)

o  Statutory profit before taxation £374.3m, down 39% at AER (2014 FY: £609.2m)

o  32.2m customers, up 12%, including 7.3m from joint ventures and associates (2014 FY: 28.7m)

o  Net cash flow from operations of £788.1m stable at AER (2014 FY: £789.5m)

o  Well capitalised with Solvency II capital coverage ratio of 180% 

Stuart Fletcher, CEO of Bupa, commented:

"We made steady progress this year, despite challenging economic conditions and political and regulatory changes in a number of our markets.  By focusing on meeting the needs of customers across our diversified geographic footprint covering health insurance as well as providing health and care, we maintained strong market positions and grew revenue and customer numbers in 2015.

We delivered underlying profit growth across most of Bupa, with growth in Australia and New Zealand, the UK, International Development Markets and Bupa Global. Regulatory change in Spain has impacted group underlying profit, but this aside, group profit performance is encouraging. 2015 was another period of strong cash generation and, as we have no shareholders, this is available to reinvest into the business.

Our focus on making a positive impact on the environment led to a 23% reduction in absolute carbon emissions compared to our 2009 baseline, exceeding our target of 20% reduction while revenue has grown by more than 40% over the same period.

We continue to invest for the future, growing our sales and marketing capabilities and developing products and partnerships to meet the needs of our customers, with a particular focus on digital tools and services. This, combined with our international scale, market-leading positions, strong brand and robust financial management, means we are positioned for continued sustainable revenue and profit growth." 

Performance

o  Grew revenue 6% in 2015, with good progress in Australia and New Zealand (up 8%), the UK (up 5%); Spain and Latin America Domestic 9% and International Development Markets (IDM) (up 8%). In Bupa Global, revenue was down 5%, reflecting the decisions taken over 2013 and 2014 to exit from non-strategic markets and re-price previously loss-making corporate accounts, some of which chose not to renew.

o  Customer numbers increased 12% to 32.2m with strong contributions from across Bupa, particularly the UK (up 28%) due to growth in numbers of health insurance customers and IDM (up 13%), primarily driven by growth in Saudi Arabia.

o  Delivered solid underlying profit growth across most of Bupa with Australia and New Zealand up 2%, the UK up 4%, IDM, up over 100%, and Bupa Global up 2%. Following a change in legislation resulting in a more negative outlook for our Public Private Partnerships (PPPs) in Spain, we have recognised a non-cash adjustment of £52m to reflect the reassessed profitability over the life of the contracts. This was the primary cause of a 40% decrease in underlying profit for Spain and Latin America. As a consequence, group underlying profit overall was down 2%.

o  As a result of ongoing funding pressures experienced by local authorities and the impending introduction of the National Living Wage in the UK, there has been a partial write down to the value of our Care Services UK business with an impairment to goodwill and write down in property and equipment. This impacted statutory profit by £181.9m, down 39% at AER. 

Operational highlights

o  Purchased an additional 17.3% shareholding in Bupa Chile in December, increasing our shareholding to 73.7%.  In 2016, we further increased our stake to 100%.

o  Launched new tiered international health insurance products in the UK, Hong Kong, Mexico and Chile.

o  Introduced innovations in digital health insurance, health and wellness including the Blue Room (Australia), Bupa Boost (UK), Blua and Sanihub (Spain).

o  Expanded our dental businesses with 18 new centres in Australia, six in the UK and eight in Spain, bringing our total to 628 globally.

o  Exceeded our 2010 target of reducing our carbon footprint by 20% from a 2009 baseline achieving a 23% absolute reduction even with over 40% revenue growth over the period. 

Financial position

o  Well-capitalised under Solvency II regime, following approval of an insurance premium risk parameter specific to Bupa, with 180% coverage of the Solvency Capital Requirement (SCR).

o  Strong capital position maintained with 267% coverage of Insurance Groups Directive (IGD) capital requirement (2014 FY: 319%).

o  Leverage ratio steady at 27.7% (2014 FY 27.6%)

o  Key credit ratings maintained with Fitch (A-) and Moody's (Baa2). Moody's outlook moved from stable to positive during the second half of the year.

o  Operating cashflow remains strong at £788.1m (2014 FY: £789.5m).

About Bupa

Bupa's purpose is longer, healthier, happier lives.

As a leading global health and care company, we offer health insurance, medical subscription schemes and other health and care funding products; we run care homes, retirement and care villages, primary care, diagnostic and wellness centres, hospitals and dental clinics. We also provide workplace health services, health assessments and long-term condition management services.

Approximately 71% of Bupa's revenue is from health insurance, with the balance coming from health and care provision. This includes our 17 hospitals, 320 clinics, 456 care homes and 37 retirement villages, 6285 dental centres, and 36 optical outlets.