Revenue of £14.0bn was up 7% (2021: £13.1bn) at constant exchange rates (CER) with year-on-year growth in all our lines of business.
Underlying profit1 before taxation of £575m was up 43% at CER (2021: £402m) and included a number of one-off exceptional trading items in our Market Units, which are broadly neutral at a Group level.
There were asset impairments across goodwill, other intangibles and tangible assets during the second half of the year totalling £1bn. The material Business Unit impairments were UK Dental (£646m), Bupa Chile (£162m), BVAC Australia (£105m) and UK Care Services (£90m). In some cases, these were the result of macroeconomic factors and in other cases, due to market-specific dynamics which are further detailed below.
Statutory loss before taxation of £(427)m is a decline from a profit of £423m in 2021 (a 201% decline at actual exchange rates (AER)).
Continued implementation of our new 3×6 strategy drove strong customer volume growth, with one million more health insurance customers worldwide. In health provision, we grew by two million customers. Together with pricing action, these dynamics driven by customer demand offset global inflationary headwinds.
Solvency II coverage ratio2 remains strong at 181% (2021: 179%) with leverage (excluding IFRS 16 liabilities) improving to 18.5% (2021: 19.6%).
Market Unit and other Businesses underlying profit percentages are derived from reportable segments (which excludes central expenses and net interest margin). Revenues from associate businesses are excluded from reported figures. Customer numbers and economic share of post-tax profits from our associate businesses are included.
Business context
These results reflect continuing good organic growth across many of our insurance businesses and increased activity in health provision businesses to meet increasing customer demand.
These results were offset by ongoing challenges in workforce availability across several markets, particularly in UK Dental. The impacts of COVID-19 have subsided in most of our markets but persisted in parts of our Asia Pacific Market Unit.
During 2022, global inflation rose sharply resulting in higher central bank interest rates, leading to increased cost of capital which reduces the valuation of business units for impairment testing.
Iñaki Ereño, Group CEO, commented:
“These results demonstrate positive underlying performance in a challenging economic environment and also reflect the rising demand for healthcare across all of our markets. We are making good progress implementing the new 3×6 strategy and we will accelerate this work through 2023 across all businesses.
“We are transforming Bupa worldwide with a focus on digitalisation and customer service, and good organic customer growth demonstrates how our customers see the value of our services, even in a cost-constrained environment.
“Significant goodwill impairments show that our businesses are not immune from macro-economic challenges and that we also have issues to fix in some businesses. We are encouraged by the quality of the growth across multiple businesses as they transform, while we continue to deliver quality and accessible healthcare for our customers.”
Market performance (all at CER)
Asia Pacific: Revenue declined marginally by 1% to £5,638m, largely due to our commitment to not benefit from COVID-19 by returning cash to, and deferring premium rises for, our Australian health insurance customers. Underlying profit was £302m, an increase of 32%, and 3% after removing the impact of, as yet, undistributed health insurance COVID-19 claim savings. Improved underlying profit reflects volume growth across insurance and provision, offset by reduced occupancy in aged care, due to the localised impacts of COVID-19 and workforce availability.
Europe and Latin America: Revenue grew by 16% to £4,560m, and underlying profit increased by 40% to £233m. This included a one-off £40m Consumer Price Index (CPI) linked performance catch-up on a long-standing public private partnership (PPP) hospital contract in Spain. If excluded, the increase in underlying profit was 16%. This was driven by customer growth across most businesses and increased occupancy in Spanish aged care. This was offset by ongoing challenges affecting one of our businesses in Chile (the Isapre insurance business) which are explained in notes to the editor below.
Bupa Global and UK: Revenue was up 9% to £3,752m, due to an increase in customers across insurance and health provision, alongside improved occupancy in UK Care Services. Underlying profit declined by 58% to £25m primarily due to a one-off £117m impairment to right of use leases and fixed assets in UK Dental. There was continued customer growth and improved loss ratios in health insurance, with Bupa Global, our International Private Medical Insurance (IPMI) business, returning to profitability. This outweighed higher staff and inflationary costs pressures in health provision and aged care, alongside a shortage of clinician hours in dental.
Other businesses: Underlying profit of £58m is up 16% driven by strong underlying customer growth in our associate businesses as both the demand for private health insurance grew and these businesses emerged from the pandemic.
Financial position
• Solvency II capital coverage ratio of 181% (2021: 179%).
• Leverage ratio is 26.3% (2021: 26.9%) including IFRS 16 lease liabilities. Excluding IFRS 16 liabilities, the leverage ratio is 18.5% (2021: 19.6%).
• Net cash generated from operating activities was £966m, up £47m on prior year (2021: £919m3) primarily due to strong trading performance.
Other highlights
We continued to develop and roll-out Blua, our digital health solution, expanding it to 10 countries, including the UK.
We launched our new sustainability strategy through which we will deliver health benefits for people and planet with innovative solutions to sustainability challenges.
Through our business in Poland, LUX MED, we have been providing free healthcare support to Ukrainian refugees who have been forced to flee the war. To date, we have provided 320,000 free treatments to over 180,000 people and have employed 240 healthcare workers from Ukraine.
We became the Official Healthcare Partner to Paralympics GB and Paralympics Australia, joining our existing partnerships in Spain, Poland and Chile.
Read the Bupa Group 2022 full year financial results statement.
