Bupa Finance plc (Bupa Finance)

HALF YEAR STATEMENT FOR THE SIX MONTHS TO 30 JUNE 2024

 

Financial headlines[1]

•     Insurance customers of 33.2m, up 23%, provision customers served of 14.2m, up 12%; and aged care occupancy of 93%, up 2ppt.

•     Revenue £8.3bn, up 16% (HY 2023: £7.1bn) at Constant Exchange Rates (CER). Excluding Niva Bupa consolidated from this year and the returns of COVID-19 claims savings to customers in Australia Health Insurance, revenues increased by 10%.

•     Underlying profit[2] before taxation £454m, up 45% at CER (HY 2023: £313m) driven by the strong growth in revenues and higher investment returns.

•     Statutory profit before tax £509m, up 64% at Actual Exchange Rates (AER) (HY 2023: £310m).

•     Solvency II capital coverage ratio of 167%[3] (FY 2023: 175%).

•     Leverage (excluding IFRS 16 lease liabilities) of 19.1% (FY 2023: 20.6%).

•     In January 2024 increased our shareholding in Niva Bupa, a leading Indian health insurance company by 22% to 63%, becoming the controlling shareholder.

◦     On acquisition remeasured the business to fair value, recognising a £321m increase in the value of our existing stake from £96m to £417m.

◦     On a fully consolidated basis at HY 2024 Niva Bupa contributed £220m in revenues and a £45m underlying loss, resulting from acquisition cost strain on short term new business and renewals. Profit associated with the value of in-force business of £48m was recognised at fair value on acquisition, of which £43m would normally have earned through HY 2024.

 

Iñaki Ereño, Bupa Group CEO, commented:

"Our half year 2024 financial results demonstrate that we are continuing to grow our business due to a combination of strong organic customer growth in health insurance, increased activity in health provision and higher occupancy in aged care. We are encouraged by the positive overall performance across the Group as our businesses continue to transform against our strategic priorities.

 

We remain focused on delivering excellent customer service and high standards of care, building on the strong foundations we have created as we move into the next phase of our strategy."

 

Market Unit performance (all at CER)

•     Bupa Asia Pacific: Revenue increased by 16% to £3,071m. Excluding the return of COVID-19 related claims savings to customers in Australia Health Insurance, revenue increased by 8%. Underlying profit increased by £193m to £231m, primarily due to the reduction in the final return of COVID-19 claims savings to customers to £20m (HY 2023: £220m) partially offset by the claims savings arising from COVID-19 disruption in HY 2023 not arising in HY 2024[4].

•     Europe and Latin America: Revenue grew by 11% to £2,678m. Underlying profit increased by 11% to £156m, as a result of revenue growth and higher investment returns, partially offset by a loss in Chile as anticipated following cancellation of the GES[5] price increase.

•     Bupa Global, India and UK: Revenue grew by 23% to £2,524m. Excluding Niva Bupa revenues[6] which have been consolidated from this year, revenue increased by 12%. Underlying profit reduced by (55)% to £64m as revenue growth was offset by a loss in Niva Bupa and the timing of the return of premium release[7] in the prior year, which offset the tail end of COVID-19 deferred claims in UK Insurance, some of which arose in the first half of 2024. The loss in Niva Bupa arose from acquisition cost strain and the absence of in-force profit earning through the period having recognised it at fair value on acquisition.

•     Other businesses⁶: Our businesses in Saudi Arabia delivered underlying profit of £56m, up 36% on the prior year driven by revenue growth and higher investment returns.

 

Group profitability

•     Total underlying profit was £454m, up 45% at CER (HY 2023: £313m) driven by the increase in Market Unit profits, partly offset by an increase in central costs as we support business growth and increase investments into global capabilities, including environmental, social and governance (ESG) activities.

•     Statutory profit before tax was £509m, up 64% at AER (HY 2023: £310m) driven by the £133m AER increase in underlying profit and £66m improvement in non-underlying items. The increase in non-underlying items was mainly driven by the net impact of, a £309m[8] gain on remeasuring the value of our existing stake in Niva Bupa to fair value, partially offset by a provision of £215m for the retrospective liability relating to the statutory Risk Factor Tables in Isapre Cruz Blanca in Chile (refer to Page 3 Note on Chile for further details).

 

Financial position

•     Solvency II capital coverage ratio of 167% remained at the top of our 140-170% target range (FY 2023: 175%).

•     Leverage ratio of 26.4% (FY 2023: 27.9%) when including IFRS 16 lease liabilities. Excluding these liabilities, the leverage ratio was 19.1% (FY 2023: 20.6%).

•     Net cash generated from operating activities remained strong at £750m (HY 2023: £875m).

 

Other highlights

•     We continue to expand our provision footprint globally. In the first half of 2024, we opened one new hospital, 27 clinics and 14 dental centres globally.

•     We now have over 6.8m customers using Blua[9], our digital health solution, with plans to significantly increase this going forward.

•     In the first six months of 2024, 91% of our Business Units improved their Net Promoter Score (NPS).

•     In our global People Pulse survey, we reached our highest ever engagement score of 83 (81 in May 2023), exceeding the high performing (top decile) external benchmark by three points.

•     We expanded our Paralympic partnerships to include New Zealand and Hong Kong, building on our existing partnerships in Great Britain, Spain, Poland, Australia, Chile and Mexico. We look forward to supporting our teams in Paris later this year.

•     In June, we became the official global healthcare partner of the All Blacks, Teams in Black and the international healthcare partner of the Black Ferns. The four-year partnership will promote the links between health and high performance.

 

Note on Chile

•     As disclosed previously, Bupa's Isapre business in Chile has been negatively impacted by judicial and regulatory action. The Chilean Supreme Court has significantly shifted its interpretation of Isapre pricing in recent years, with the cumulative effect of restricting the previously permitted, and generally accepted, pricing/rate-setting approach.

•     At 30 June 2024 an IFRS provision of £215m has been recognised in relation to Isapre Cruz Blanca and the retrospective liability relating to statutory Risk Factor Tables. This matter was disclosed as a contingent liability at 31 December 2023 as due to the wide range of possible outcomes and regulatory uncertainty, it was not possible to reliably estimate the value of the future payments. However, in May 2024 legislation came into force that gave clarity over the quantum and steps required for implementation of the retrospective liability relating to statutory Risk Factor Tables (used to adjust the price of insurance contracts based on risk factors such as age). The local regulator Superintendent of Health (SIS) issued additional guidance on 7 June 2024 which set out details of the next steps the Isapres are required to take.

•     As a result of the clarity the legislation provides, we are now able to arrive at a reliable estimate and have recognised a provision in accordance with a payment plan which has been submitted to the SIS for approval. SIS review of the plan is still underway and as such some uncertainty remains until the approval of the plan, which is likely to be concluded by 31 December 2024. The liability is expected to be settled over 13 years in accordance with the legislation and the provision has been discounted over this period using a Chilean risk-free rate.

•     Under Solvency II the FY 2023 provision of £187m[10] recognised in relation to Isapre Cruz Blanca has been increased by £28m to align with the amount provided under IFRS.

 

Enquiries

 

Media - Duncan West (External Communications): [email protected]

 

Investors - Gareth Evans (Treasury): [email protected]

 

This statement is also available at www.bupa.com/financials/results-centre

 

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).

 

Established in 1947, Bupa's purpose is helping people live longer, healthier, happier lives and making a better world. We are an international healthcare company serving over 50 million customers worldwide[11]. With no shareholders, we reinvest profits into providing more and better healthcare for the benefit of current and future customers. Bupa has businesses around the world, principally in the UK, Australia, Spain, Chile, Poland, New Zealand, Hong Kong SAR, Türkiye, Brazil, Mexico and India. We also have associate businesses in Saudi Arabia. For more information, visit www.bupa.com.

 

Disclaimer: Cautionary statement concerning forward-looking statements

This document may contain certain 'forward-looking statements'. Forward-looking statements often use words such as 'intend', 'aim', 'project', 'anticipate', 'estimate', 'plan', 'believe', 'expect', 'forecasts', 'may', 'could', 'should', 'will', 'continue' or other words of similar meaning. 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, risks arising out of health crises and pandemics, 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. Recipients should not place reliance on, and are cautioned against relying on, any forward-looking statements. Except as required by any laws and regulations, 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. No statement in this document is intended to be a profit forecast. 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.

 

Bupa Group CEO's Review

Our half year 2024 financial results demonstrate that we are continuing to grow our business due to a combination of strong organic customer growth in health insurance, increased activity in health provision and higher occupancy in aged care. We are encouraged by the positive overall performance across the Group as our businesses continue to transform against our strategic priorities.

 

Providing high quality care and experiences to our customers across health insurance, health provision and aged care remains our core priority, and we have driven significant improvements over the last three years since the launch of our 3x6 strategy. The strategy continues to inspire our people to be more customer-centric and to deliver change in a more agile way as well as transforming the organisation.

 

In our health insurance businesses, we have driven further customer growth across each of our Market Units as demand for private healthcare continues to increase. Increasing numbers of customers are using Blua and our other digital health solutions which enable them to connect remotely with healthcare professionals and digital services, including virtual appointments and health programmes that can be managed at home.

 

In health provision, we are seeing higher levels of activity due to increased customer demand. In aged care, occupancy rates have continued to rise across each of our businesses.

 

Our people play a vital role in the care and experiences we give to our customers. They are at the heart of everything we do. I'm proud that in our latest global People Pulse survey we reached our highest ever engagement score of 83. We will continue to listen, identify and act on ways to improve our people's experience of working at Bupa.

 

Outlook

We are encouraged by the positive overall performance and momentum across the Group as our businesses continue to transform against the strategic priorities agreed as part of our portfolio management strategy.

 

As stated in the Business Risk section, changes in governmental and regulatory policy continue to be one of our top risks, as seen in Chile where our Isapre business has been negatively impacted by judicial and regulatory action. Following new legislation and guidance enabling us to reliability estimate a provision, the uncertainty around the IFRS, Solvency II and liquidity impacts has been materially resolved. However, whilst a regulatory review of the payment plan submitted to the regulator is ongoing, some uncertainty remains.

 

Looking ahead, we remain well placed to navigate challenges and take opportunities because of our underlying financial strength, resilience and diversified business model. We are confident for the future and there is positive momentum behind our 3x6 strategy and our ambition to be the world's most customer-centric healthcare company. There is much to do and we are well positioned to meet customer healthcare needs with an ever-increasing external focus on health and wellbeing.

 

FINANCIAL REVIEW

 

Summary

 

	HY 2024	HY 2023 (AER)	% growth/ (decline)	HY 2023 (CER)	% growth/ (decline)
Revenue	£8.3bn	£7.4bn	12%	£7.1bn	16%
Underlying profit	£454m	£321m	41%	£313m	45%
Cash generated from operating activities	£750m	£875m	(14)%	n/a	n/a
Statutory Profit before tax	£509m	£310m	64%	n/a	n/a
Leverage (excl. IFRS 16)	19.1%	20.1%	1.0ppts	n/a	n/a
Leverage (incl. IFRS 16)	26.4%	26.8%	0.4ppts	n/a	n/a
Solvency	167%	171%	(4)ppts	n/a	n/a

 

Revenue (CER)

Group revenue was up 16%. Excluding Niva Bupa revenues consolidated from this year and the returns of COVID-19 claims savings to customers in Australia Health Insurance, revenues increased by 10%. The increase was driven by customer growth in insurance, increased activity in health provision and higher occupancy in aged care. Pricing changes also drove higher revenues as we seek to balance the impacts of inflation, remaining competitive for customers and maintaining discipline in our underwriting of insurance risk.

 

Revenue in health insurance grew by 18%. Excluding Niva Bupa and the return of COVID-19 claims savings in Australia Health Insurance, insurance revenues grew 10% with customer growth of 7%[12] and period-on-period growth across all Market Units.

 

Our health provision businesses saw revenue growth of 10% driven by higher levels of activity across all market units.

 

In aged care, revenue was up 12% as occupancy rates increased across all of our businesses in the UK, Spain, Australia and New Zealand, combined with a revised government funding model in Australia to improve levels of care for residents and address shortfalls within the sector.

 

Underlying profit (CER)

Group underlying profit increased 45% to £454m (HY 2023: £313m) driven by the strong increase in revenues and higher investment returns across all market units.

 

Health insurance underlying profit increased with growth in revenues and investment returns across all Market Units. In our Asia Pacific Market Unit profits increased primarily due to the reduction in the final return of COVID-19 claims savings to customers to £20m (HY 2023: £220m) partially offset by the claims savings arising from COVID-19 disruption in HY 2023 not arising in HY 2024. In our Europe and Latin America Market Unit profits increased due to volume growth and higher investment returns, partially offset by losses in Chile, as anticipated at FY 2023 following cancellation of the GES[13] price increase. In our Bupa Global, India and UK Market Unit underlying profit reduced as strong growth in revenue and investment returns were more than offset by a loss in Niva Bupa from acquisition cost strain and the absence of in-force profit earning through having recognised it at fair value on acquisition, and the timing of the return of premium release[14] in the prior year, which offset the tail end of COVID-19 deferred claims in UK Insurance, some of which arose in the first half of 2024.

 

Profits grew strongly in health provision supported by strong revenue growth whilst aged care profits grew strongly in the period driven by higher revenues and margin improvement.

 

Investment into initiatives that improve our capability globally, including ESG, and higher staff costs resulted in central costs increasing to £(53)m (HY 2023: £(49)m).

 

Statutory profit

Statutory profit before taxation was £509m up 64% at AER (HY 2023: £310m), as the higher underlying result was further increased by a positive variance in non-underlying items which totalled a £55m gain at HY 2024, compared with a £(11)m cost at HY 2023.

 

The key drivers of the movement in non-underlying items at HY 2024 were the £309m gain on remeasuring the value of our existing stake in Niva Bupa to fair value (refer to Note 20 Business combinations and disposals for further details), partially offset by a provision of £215m for the retrospective liability relating to the statutory Risk Factor Tables in Isapre Cruz Blanca in Chile (refer to Page 3 Note on Chile for further details). Short-term fluctuations on investment returns resulted in a loss of £(12)m (HY 2023: £6m gain). Overall, our return-seeking asset portfolio delivered a positive return in H1 2024, driven by higher interest income on bonds and floating rate securities, supported by a tightening in credit spreads. However, a movement higher in long-term yields led to negative short-term fluctuations compared to our expected return[15]. This compares to H1 2023 where we saw actual returns higher than expected, driven by higher interest income on floating rate assets and tighter credit spreads, but with relatively stable longer-term yields. We also reported a gain on realised and unrealised foreign exchange in the period of £8m (HY 2023: £12m gain).

 

Also included was a £(12)m (HY 2023: £(16)m) amortisation charge on intangible assets in Bupa Villages and Aged Care Australia following the government announcement to deregulate bed licences from 1 July 2025 (pushed back from 1 July 2024); and other items of £(13)m (HY 2023: £(11)m).

 

	HY 2024 £m	HY 2023 £m
Bupa Asia Pacific at CER	231	38
Europe and Latin America at CER	156	140
Bupa Global, India and UK at CER	64	142
Other businesses at CER	56	42
Central costs	(53)	(49)
Consolidated underlying profit before taxation at CER	454	313
Foreign exchange re-translation on 2023 results (CER/AER)	-	8
Consolidated underlying profit before taxation at AER	454	321
Short-term fluctuation on investment returns inc. Mark-to-Market	(12)	6
Niva Bupa fair value gain on pre-existing shareholding	309	-
Chile payment plan provision	(215)	-
Net loss on disposal of businesses and transaction costs on business combinations	(10)	(2)
Realised and unrealised foreign exchange gain/(loss)	8	12
Amortisation of bed licences	(12)	(16)
Other non-underlying items	(13)	(11)
Total non-underlying items	55	(11)
Statutory profit before taxation at AER	509	310

 

Insurance service result

Under IFRS 17 we are required to report an insurance service result which comprises: insurance revenue, less insurance service expenses. This result excludes financial income and expenses. For HY 2024 the Group insurance service result was £188m (HY 2023: £176m) driving a combined operating ratio (COR) of 97% (HY 2023: 97%). The increase in the insurance service result was driven by a significant increase in Australia Health Insurance profitability, due to the reduction in the net cost of returning COVID-19 claims savings to customers, largely offset by margin reduction in Chile where losses in the Isapre increased, and a loss in Niva Bupa from acquisition cost strain and the absence of in-force profit earning through having recognised it at fair value on acquisition, and the timing of the return of premium release[16] in the prior year, which offset the tail end of COVID-19 deferred claims in UK Insurance, some of which arose in the first half of 2024.

 

Taxation

The Group's effective taxation rate for the period was 26% (HY 2023: 22%; FY 2023: 25%), which is in line with the current UK corporation taxation rate of 25%.

 

The Group operates in the UK where new tax legislation to implement a global minimum top-up tax was enacted in July 2023 and became effective from 1 January 2024. In accordance with IAS 12, the Group has applied a temporary mandatory relief from deferred tax accounting for the impacts of the top-up tax, and instead accounts for it as a current tax when it is incurred. The current tax charge with respect to the top-up tax for the period was £nil; HY 2023: £nil; FY 2023: £nil.

 

Cash flow

Net cash generated from operating activities remained strong at £750m (HY 2023: £875m). The £(125)m reduction period-on-period was driven by the impact of COVID-19 claims savings in Australia Health Insurance increasing cash generated at HY 2023, the timing of collections on corporate and NHS contracts and losses in Chile. Net cash flow used in investing activities increased by £(322)m to £(825)m driven by the acquisition of a controlling interest in Niva Bupa. Cash used in financing activities has increased by £(191)m to £(361)m due to the redemption of £300m senior unsecured bonds in April 2024.

 

Funding

We manage our funding prudently to ensure a strong platform for continued growth. Bupa's policy is to maintain investment grade access to both the senior and subordinated bond markets. Fitch and Moody's reviewed Bupa's credit ratings during 2023 with no change. Moody's has reaffirmed Bupa's ratings in July 2024.

 

We continue to hold a good level of Group liquidity. At 30 June 2024, our £900m Revolving Credit Facility (RCF) was drawn by £150m (FY 2023: undrawn). We completed the Niva Bupa acquisition and also repaid a £300m senior bond in the period. These were funded through a combination of remaining cash available from the €500m senior bond issued in October 2023 and drawings under the RCF. Coverage of financial covenants within the facility remains strong.

 

We focus on managing our leverage in line with our credit rating objectives. The reduction in leverage excluding IFRS 16 leases to 19.1% was largely driven by the use of cash to repay a portion of the bond in April.

 

Solvency

Our solvency coverage ratio of 167%[17] remains strong and is towards the upper end of 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 2024, the estimated SCR of £3.0bn was £0.1bn higher and Own Funds of £5.0bn was in line with FY 2023.

 

Our surplus capital was estimated to be £2.0bn, compared to £2.1bn at FY 2023, representing a solvency coverage ratio of 167%¹⁷ (FY 2023: 175%). Our business generated capital from operating activities of £220m. This capital generation was offset by M&A (including the Niva Bupa acquisition), capital expenditure, currency risk and an increased provision in relation to Isapre Cruz Blanca in Chile.

 

The impact of the Niva acquisition is an estimated eight percentage points reduction to the Group's solvency coverage ratio, this is in line with the pro-forma we published at the year end (refer to Page 1 for further details).

 

A provision of £215m for Isapre Cruz Blanca in Chile has been recognised, with an increase of £28m under Solvency II to align with IFRS, subject to the approval of a 13 year payment plan (refer to Page 3 Note on Chile for further details).

 

We perform an analysis of the relative sensitivity of our estimated solvency coverage ratio to changes in market conditions and underwriting performance. Each sensitivity is an independent stress of a single risk and before any management actions. The selected sensitivities do not represent our expectations for future market and business conditions. A movement in values of properties that we own continues to be the most sensitive item, with a 10% decrease having a ten percentage points reduction to the solvency coverage ratio.

 

Our capital position is resilient in the face of the individual risks, illustrating the strength of our balance sheet.

 

Risk Sensitivities	Solvency II coverage ratio
Solvency coverage ratio	167%
Property values -10%	157%
Loss ratio worsening by 2%[18]	160%
Sterling depreciates by 20%	161%
Group Specific Parameter (GSP) +0.2%[19]	165%
Interest rate +/-100bps	167%
Credit spreads +100bps (no credit transition)	166%
Pension risk +10%	167%
Equity markets -20%	167%

 

We include a Group Specific Parameter (GSP) in respect of the insurance risk parameter in the Standard Formula. We apply a premium recognition adjustment to the GSP loss ratio data to allow for the distorting impact of the COVID-19 pandemic.

 

MARKET UNIT PERFORMANCE

 

Bupa Asia Pacific

	Revenue	Underlying profit
HY 2024	£3,071m	£231m
HY 2023 (AER)	£2,773m	£40m
% growth	11%	479%
HY 2023 (CER)	£2,643m	£38m
% growth	16%	511%

 

(Commentary on a CER basis)

 

Revenue in our Asia Pacific Market Unit increased by 16% to £3,071m. Excluding the return of COVID-19 related claims savings to customers in Australia Health Insurance, revenue increased by 8% driven by new Australia Health Insurance members, an increase in Australia and New Zealand aged care occupancy, and higher utilisation in Hong Kong health services.

 

Overall, Asia Pacific underlying profit increased year on year with growth across all business units. However, the material driver of the year on year increase was a significant reduction in the net cost of returning COVID-19 claims savings to customers in Australia Health Insurance[20].

 

In the first half of 2024, 100% of our Business Units improved their Net Promoter Score (NPS). We also implemented around 1,250 customer experience improvements across the prioritised parts of our customer journey.

 

In Australia Health Insurance, revenues increased by 6% (when excluding the impact of COVID-19 claims savings returned to customers) driven by new insurance members. On a reported basis the COR improved to 91% (HY 2023: 100%).

 

Australia Health Insurance has increased its domestic market share to 25.3% in the March quarter, delivering six consecutive quarters of market share growth. Health Insurance has continued to deliver strong growth across all service propositions, including via Blua (progressive rollout of virtual GP consultations and Chemist delivery), Members First Ultimate Dental Network and Healthcare Programmes (a range of health and wellness and preventative care digital programs). We continue to successfully renew private hospital contracts amidst increased inflation pressures.

 

Australia Health Services delivered growth in revenue and underlying profit. Revenue growth was primarily attributable to a surge in visa assessment volumes within our Bupa Medical Visa Services division due to a change in government regulations, growth in visits under our Australian Defence Force contract, growth in our Dental business, and a resilient performance in Optical. Overall, underlying profit increased year-on-year, largely driven by higher revenues and improved margins. As part of our Connected Care strategy, two healthcare centres were opened, offering physical access to GPs and other healthcare professionals.

 

In Australia Villages and Aged Care, revenue and underlying profit increased, driven by a revised government funding model and higher occupancy, closing at a six-year high of 92% (HY 2023: 87%). This has been partly offset by additional staffing costs associated with new regulatory requirements.

 

In New Zealand Villages and Aged Care, revenue was steady while underlying profit grew. In Care Homes occupancy closed at 92% (HY 2023: 91%). Despite a subdued New Zealand property market, Village fee revenues remain strong after realising higher unit pricing on sales.

 

In Hong Kong, we were pleased with the progress being made to transform performance as revenue and underlying profit increased. Primarily due to customer growth in Health Services while the Health Insurance business also returned to profitability following improved pricing terms on the corporate book.

 

Europe and Latin America

	Revenue	Underlying profit
HY 2024	£2,678m	£156m
HY 2023 (AER)	£2,552m	£145m
% growth	5%	8%
HY 2023 (CER)	£2,418m	£140m
% growth	11%	11%

 

(Commentary on a CER basis)

 

Revenue in our Europe and Latin America Market Unit grew by 11% to £2.7bn as a result of strong customer growth and pricing. Underlying profit increased by 11% to £156m at CER driven by the increase in customers and higher investment returns.

 

In the first half of 2024, 83% of our Business Units improved their Net Promoter Score (NPS). We also implemented around 2,500 customer experience improvements across the prioritised parts of our customer journey.

 

Sanitas Seguros, our health insurance business in Spain, delivered higher revenues following the acquisition of the Asefa health portfolio in June 2023 and organic customer growth. Underlying profits reduced due to margin compression from claims inflation with a COR for the first half of the year of 95% (HY 2023: 93%). We also continued to expand digital services and, in June, we reached an average of 75,000 video consultations per month (compared to an average of 69,000 per month in June 2023).

 

Our dental business in Spain saw increased revenue and underlying profit, driven by higher customer volumes and improved margins. In the period we acquired seven clinics and opened one new clinic.

 

In our hospitals business in Spain, revenue reduced as our public private hospital partnership contract came to the end of its term whilst underlying profit increased slightly. Excluding this contract, both revenue and underlying profit increased due to higher levels of activity. During the first half of 2024, Sanitas Hospitales opened three new centres, one medical in Madrid and two for advanced rehabilitation, in Madrid and Barcelona. Work also continued on the construction of a new hospital in Madrid, which is expected to open in 2025.

 

Sanitas Mayores, our aged care business in Spain, continues to perform well, driven by an increase in occupancy to 96% (HY 2023: 95%)

 

In Chile, revenue decreased and as anticipated the business reported an underlying loss following the cancellation of the GES price increase in the Isapre business. As a result of new legislation and further guidance from the regulator we have recognised a provision of £215m in non-underlying items in relation to the retrospective liability relating to statutory Risk Factor Tables. For further details refer to Note 18 Provision for liabilities and charges.

 

In Poland, LUX MED revenue and underlying profit increased as result of strong customer growth in health provision and the development of the new InPMI product. In the first half of 2024 we acquired a new hospital with advanced orthopaedics provision with the potential to add additional capabilities. Throughout the period, we have maintained our support for Ukrainian refugees who have been forced to flee the war.

 

Bupa Acıbadem Sigorta, our health insurance business in Türkiye, delivered substantial revenue and underlying profit growth, driven by pricing increases to keep pace with higher rates of inflation and increased investment returns. The economy is classified as being a hyperinflationary environment, leading to the application of IAS 29. A net monetary loss of £9m (as of 30 June 2024) has been recorded outside of underlying profit for the period. In addition, we completed the acquisition of CompuGroup Medical Information Systems, Inc., a healthcare software company.

 

Care Plus in Brazil delivered strong revenue and profit growth as a result of higher customer numbers and higher investment returns. There was also a positive contribution from the dental business acquired in 2023 as we expand into adjacent lines of healthcare provision.

 

Bupa Mexico delivered strong revenue and profit growth due to higher customer numbers and improved combined ratio.

 

Bupa Global Latin America revenue and underlying profit increased due to pricing changes and higher investment returns. In the period, we expanded our alliance with Mapfre by jointly developing and offering new health products in Paraguay. The alliance commenced business last year in Peru and will gradually launch in other countries in Latin America.

 

Bupa Global, India and UK

	Revenue	Underlying profit
HY 2024	£2,524m	£64m
HY 2023 (AER)	£2,063m	£142m
% growth	22%	(55)%
HY 2023 (CER)	£2,055m	£142m
% growth	23%	(55)%

 

(Commentary on a CER basis)

 

Revenue growth in our Bupa Global, India and UK Market Unit increased by 23% to £2.5bn. Excluding the consolidation of Niva Bupa, revenues increased by 12% driven by the increase in the number of UK Insurance and Bupa Global customers, improved occupancy rates in UK Care Services and increased customer numbers in Health Services. Underlying profit reduced as revenue growth was offset by a loss in Niva Bupa from acquisition cost strain and the absence of in-force profit earning through having recognised it at fair value on acquisition, and the timing impact of the return of premium release in the prior year.

 

In the first half of 2024, 100% of our Business Units improved their Net Promoter Score (NPS). We also implemented around 1,250 customer experience improvements across the prioritised parts of our customer journey.

 

UK Insurance delivered strong growth in revenue, adding over 433,000 net customers across medical insurance, health trusts, dental insurance and cash plan in the first half of 2024. Underlying profit reduced driven by the timing of the return of premium provision release (£59m) in the first half of 2023. We launched Bupa Well+ enabling corporate customers to provide more of their employees with health and wellbeing support, including digital consultations with GPs and mental health professionals.

 

In Bupa Global, our IPMI business, revenue and underlying profit increased driven by growth in customer numbers and higher investment returns. Our focus is on responding to the distinct needs of our customers and people across global locations, whilst maximising the efficiency of our operating model, improving systems and digital support for our customers.

 

The COR for Bupa Insurance Limited, the UK based insurance entity that underwrites both domestic and international insurance was 97% (HY 2023: 93%).

 

In January we increased our shareholding in Niva Bupa, a leading Indian health insurance company, to support the next stage of growth and serve even more customers with their healthcare needs. Bupa is now the controlling shareholder of Niva Bupa and therefore its results are fully consolidated from this year. Alongside this we have transferred Niva Bupa from Other businesses for segmental reporting into Bupa Global and UK, in line with the management reporting structure. At HY 2024 Niva Bupa contributed £220m in revenues and a £45m underlying loss, resulting from acquisition cost strain on new business and renewals on short term business. Profit associated with the value of in-force business of £48m was recognised at fair value on acquisition, of which £43m would normally have earned through HY 2024.

 

UK Dental care returned to profitability as we see the early benefits of our turnaround strategy and improved performance in our practices. Bupa Dental Care is seeking to be the workplace of choice for all employed and self-employed dental professionals, supported by Viva, our market-leading health benefits proposition, for UK frontline colleagues and clinicians. 

 

UK Care Services, our aged care business, delivered good growth in revenue. Underlying profit increased due to strong cost management, which includes reducing our reliance on agency staff and focusing on employee retention, and we are now seeing lower energy costs. Closing occupancy was 90% (HY 2023: 89%).

 

Health Services delivered strong growth in revenue as underlying losses reduced driven by higher customer numbers in Clinics and the Cromwell Hospital. In the period we acquired 26 new clinics as part of our long-term strategy to provide more services directly to customers. Cromwell Hospital opened a new theatre to further increase patient capacity.

 

Other businesses

	Revenue	Underlying profit
HY 2024	£5m	£56m
HY 2023 (AER)	£4m	£43m
% growth	15%	30%
HY 2023 (CER)	£4m	£42m
% growth	18%	36%

 

(Commentary on a CER basis)

 

Our businesses in Saudi Arabia delivered underlying profit of £56m, up 33%[21] on the prior year driven by revenue growth and higher investment returns.

 

BUSINESS RISKS

We described our main risks in the Risk section of the Annual Report and Accounts 2023, which are available on www.bupa.com. While economic volatility, geopolitical uncertainty, information security and strategic workforce challenges remain heightened, the principal risks and themes previously identified at the 2023 year end remain.

 

Strategic and financial risks and risks impacting our ability to deliver for customers: 

The macroeconomic environment continues to be challenging in most markets we operate in. In many markets we are seeing heightened inflationary pressures and interest rates remain high. Heightened inflation is likely to impact our businesses in a variety of ways, including: increased costs, interest rates remain high impacting mortgages and household available spending, reduced personal expenditure and affordability issues, and changes in government funding levels. In all businesses we are taking actions to mitigate the impacts, including pricing action and cost control measures.

 

We continue to see strategic challenges associated with workforce availability, particularly medical professionals, which may impact our ability to deliver services.

 

Governmental, legal and regulatory policy risks: 

Changes in governmental, legal and regulatory policy has consistently been one of our top risks given the nature of our businesses and this remains true. There is increased certainty regarding the situation affecting our Isapre business in Chile however this episode demonstrates that future legislation, regulation and government decisions could have a material impact on the Group. Many of the markets we operate in are holding, or have already held, elections this year which has the potential to create uncertainty and result in changes in government as we have seen in the UK. We do not anticipate these results will have material immediate impacts on our businesses, but we continue to monitor developments. We continue to engage governments and regulators in the markets we operate in to understand and influence potential changes to ensure we are able to continue to deliver quality and value for our customers and complement public healthcare systems.

 

Operational risks: 

Information Security, Privacy and Data ownership use and governance remain key risks for the Group. Our focus on information security, technology and operational resilience in recent years is supported by significant investment to uplift capability and capacity in this area across the Group. We were not affected by the global IT outages experienced in July 2024.

 

Social and environmental risks: 

Climate change remains one of the major risks we face as a society and is a key area of focus for us as Sustainability is a core pillar of our 3x6 strategy. We closely manage our environmental impacts and promote positive environmental practices. A key focus is our commitment to become a net zero business across all our operations and throughout our value chain.

 

We have identified our key climate-related risks over the short, medium and long term and these are set out in the Annual Report and Accounts 2023.

 

Our approach to risk management: 

We have a well-established process for identifying and managing all business risks, including all types of operational risk such as information security and privacy. Monitoring and managing our risks is key to ensuring that we achieve our strategic objectives in the long-term, meeting the evolving expectations of our customers, people, bondholders and regulators. Internal controls, particularly regarding customer conduct and information security and privacy, and operational resilience continue to be key areas of focus.

 

BUPA AROUND THE WORLD

 

Bupa Asia Pacific

•     Bupa Health Insurance Australia, with 4.5m customers, is a leading health insurance provider in Australia and also offers health insurance for overseas workers and visitors.

•     Bupa Health Services in Australia is a health provision business, comprising dental, optical, audiology, medical assessment services, health centres and healthcare for the Australian Defence Force.

•     Bupa Villages and Aged Care Australia cares for around 5,500 residents across 58 homes. It also operates one retirement village in Australia.

•     Bupa Villages and Aged Care New Zealand cares for around 2,900 residents across 39 care homes. It also operates retirement villages.

•     Bupa Hong Kong comprises a health insurance business with around 375,000 customers and a Health Services business operating medical centres providing healthcare services to around 755,000 customers.

 

Europe and Latin America

•     Sanitas Seguros is the second largest health insurance provider in Spain, with almost 2.4m customers.

•     Sanitas Dental provides services through 212 centres and third-party networks in Spain.

•     Sanitas Hospitales comprise four private hospitals, 26 private medical clinics, ten advanced rehabilitation centres, a Central Laboratory and a Research Foundation.

•     Sanitas Mayores cares for around 5,800 people in 43 care homes, manages three independent day-care centres and has professional home care services with digital medical support for aged care in Spain.

•     LUX MED is a leading private healthcare business in Poland, operating in health funding and provision through 16 hospitals and 288 private medical clinics.

•     Bupa Chile is a leading health insurer serving more than 581,000 customers and offering provision services to around 1.7m customers across three hospitals and 32 medical clinics. In the first half of 2024, the elimination of COVID-19 policies resulted in a drop in the number of insurance customers.

•     Bupa Acıbadem Sigorta is Türkiye's second largest health insurer, with products for corporate and individual customers, and has 1.4m customers.

•     Care Plus is a leading health insurance company in Brazil, with around 465,000 funding customers and 131,000 occupational health customers, concentrated in São Paulo. Care Plus also has seven dental clinics, and a vaccination centre.

•     Bupa Mexico is a health insurer offering international and local private medical insurance to individuals and corporates in Mexico. It has its own medical provision, Bité Médica hospital, and a TPA called Vitamédica. It provides services to around 555,000 customers.

•     Bupa Global Latin America offers international health insurance and local health insurance products in Latin America to more than 80,000 customers. It is headquartered in Miami and has operations in Ecuador, Dominican Republic, Guatemala and Panama.

 

Bupa Global, India and UK

•     Bupa UK Insurance is a leading health insurer, with 3.8m customers across medical insurance, health trusts, dental insurance and cash plans.

•     Bupa Global serves around 360,000 IPMI customers and administers medical assistance for individuals, small businesses and corporate customers.

•     Niva Bupa is a leading provider of health insurance and retail health insurance in India, with 15.4m customers.

•     Bupa Dental Care is a leading provider of private dentistry, providing dental services through around 400 centres across the UK and the Republic of Ireland.

•     Bupa Care Services cares for around 6,200 residents in 117 care homes and ten Richmond care villages.

•     Bupa Health Services comprises 52 health clinics[22] and the Cromwell Hospital.

 

Other businesses

•     We also have an associate health insurance business in Saudi Arabia (Bupa Arabia) and an interest in MyClinic in Saudi Arabia.

 

Bupa Finance plc

 

(Company Number 2779134)

 

Condensed Consolidated Half Year Financial Statements (unaudited)

 

Six months ended 30 June 2024

 

Bupa Finance plc

Condensed Consolidated Income Statement

for the six months ended 30 June 2024 (unaudited)

 

		For six months ended 30 June 2024	For six months ended 30 June 2023	For year ended 31 December 2023
	Note	£m	£m	£m
Insurance revenue	2, 14.1	5,937	5,234	10,770
Insurance service expenses	14.1	(5,748)	(5,051)	(10,318)
Insurance service result before reinsurance contracts held	14.1	189	183	452
Net expense from reinsurance contracts held	14.2	(1)	(7)	(7)
Insurance service result		188	176	445
Care, health and other customer contract revenue	3	2,303	2,130	4,268
Other revenue	3	42	37	78
Total non-insurance revenue	3	2,345	2,167	4,346
Share of post-taxation results of equity-accounted investments		54	44	83
Impairment of goodwill and intangible assets	7	-	-	(17)
Other operating expenses		(2,507)	(2,138)	(4,292)
Other income and charges	4	313	13	42
Total other expenses, income and charges		(2,140)	(2,081)	(4,184)
Profit before financial income and expense		393	262	607
Financial income and expense
Financial income	5	239	158	363
Financial expense	5	(100)	(91)	(190)
Net financial expense from insurance contracts issued	5.1, 14.1	(9)	(8)	(25)
Net monetary loss	1.5	(5)	(4)	(18)
Net impairment on financial assets		(9)	(7)	(20)
Net financial income		116	48	110
Profit before taxation expense		509	310	717
Taxation expense	6	(133)	(68)	(177)
Profit for the period		376	242	540
Attributable to:
Shareholder of Bupa Finance plc		387	240	538
Non-controlling interests		(11)	2	2
Profit for the period		376	242	540

 

Notes 1-21 form part of these Condensed Consolidated Financial Statements.

 

Bupa Finance plc

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 30 June 2024 (unaudited)

 

 

		For six months ended 30 June 2024	For six months ended 30 June 2023	For year ended 31 December 2023
	Note	£m	£m	£m
Profit for the period		376	242	540
Other comprehensive income/(expense)
Items that will not be reclassified to the Income Statement
Unrealised loss on revaluation of property		-	-	(15)
Items that may be reclassified subsequently to the Income Statement
Foreign exchange translation differences on goodwill	7	(18)	(92)	(55)
Other foreign exchange translation differences		(99)	(260)	(235)
Net gain on hedge of net investment in overseas subsidiaries		25	81	73
Share of other comprehensive (expense)/income of equity-accounted investments		(4)	(1)	2
Change in fair value of financial investments through other comprehensive income		1	(1)	(4)
Change in ECL of financial investments through other comprehensive income		3	1	1
Realised loss on disposal of financial investments at fair value through other comprehensive income		-	-	4
Change in cash flow hedge reserve		7	-	(7)
Release of foreign exchange translation reserve on derecognition of equity-accounted investments and subsidiaries		11	-	(2)
Total other comprehensive expense		(74)	(272)	(238)
Comprehensive income/(expense) for the period		302	(30)	302
Attributable to:
Shareholder of Bupa Finance plc		314	(31)	302
Non-controlling interests		(12)	1	-
Comprehensive income/(expense) for the period		302	(30)	302

 

Notes 1-21 form part of these Condensed Consolidated Financial Statements.

 

Bupa Finance plc

Condensed Consolidated Statement of Financial Position

as at 30 June 2024 (unaudited)

 

		At 30 June 2024	At 31 December 2023	At 30 June 2023
	Note	£m	£m	£m
Assets
Goodwill and intangible assets	7	3,201	2,660	2,633
Property, plant and equipment	8	3,583	3,605	3,613
Investment property	9	779	776	717
Equity-accounted investments	10	967	1,056	972
Post-employment benefit net assets	11	2	2	2
Deferred taxation assets		94	95	172
Restricted assets	12	129	122	126
Financial investments	13	4,694	3,638	4,007
Derivative assets		26	46	58
Reinsurance contract assets	14.2	110	38	30
Current taxation assets		17	50	9
Inventories		68	76	89
Trade and other receivables		966	829	1,084
Assets held for sale	15	9	48	24
Cash and cash equivalents	16	1,795	2,278	1,548
Total assets		16,440	15,319	15,084
Liabilities
Subordinated liabilities	17	(772)	(747)	(746)
Other interest-bearing liabilities	17	(924)	(1,090)	(951)
Post-employment benefit net liabilities	11	(8)	(8)	(9)
Lease liabilities		(881)	(894)	(928)
Deferred taxation liabilities		(116)	(115)	(112)
Share purchase liability	5, 20	(120)	-	-
Derivative liabilities		(46)	(63)	(83)
Provisions for liabilities and charges	18	(545)	(335)	(294)
Insurance contract liabilities	14.1	(3,388)	(2,608)	(2,916)
Current taxation liabilities		(58)	(35)	(52)
Trade and other payables		(2,395)	(2,417)	(2,246)
Liabilities associated with assets held for sale	15	-	(9)	-
Total liabilities		(9,253)	(8,321)	(8,337)
Net assets		7,187	6,998	6,747
Equity
Share capital		200	200	200
Foreign exchange translation reserve		189	241	178
Property revaluation reserve		587	601	618
Cash flow hedge reserve		-	(7)	-
Income and expenditure reserve		5,825	5,648	5,435
Equity attributable to shareholder of Bupa Finance plc		6,801	6,683	6,431
Restricted Tier 1 notes	19	297	297	297
Non-controlling interests		89	18	19
Total equity		7,187	6,998	6,747

 

Notes 1-21 form part of these Condensed Consolidated Financial Statements.

 

Bupa Finance plc

Condensed Consolidated Statement of Cash Flows

for the six months ended 30 June 2024 (unaudited)

 

		For six months ended 30 June 2024	For six months ended 30 June 2023	For year ended 31 December 2023
	Note	£m	£m	£m
Cash flow from operating activities
Profit before taxation expense		509	310	717
Adjustments for:
Net financial income		(130)	(60)	(153)
Net monetary loss	1.5	5	4	18
Depreciation, amortisation and impairment	7, 8, 15	238	238	496
Other non-cash items		(357)	(51)	(162)
Changes in working capital and provisions:
Increase in insurance contract liabilities		529	629	342
Increase in reinsurance contract assets		(27)	(10)	(18)
Funded pension scheme employer contributions		-	-	(1)
(Increase)/decrease in trade and other receivables, and other assets		(108)	(68)	2
Increase/(decrease) in trade and other payables, and other liabilities		168	(37)	232
Cash generated from operations		827	955	1,473
Income taxation paid		(76)	(79)	(175)
(Increase)/decrease in cash held in restricted assets		(1)	(1)	6
Net cash generated from operating activities		750	875	1,304
Cash flow from investing activities
Acquisition of subsidiaries and businesses, net of cash acquired		(252)	(25)	(63)
Investment in equity-accounted investments		(3)	(9)	(22)
Dividends received from associates		-	-	42
Disposal of subsidiaries and other businesses, net of cash disposed of		32	8	30
Purchase of intangible assets	7	(56)	(51)	(117)
Purchase of property, plant and equipment		(110)	(95)	(260)
Proceeds from sale of property, plant and equipment		2	4	19
Purchase of investment property		(11)	(13)	(38)
Purchases of financial investments, excluding deposits with credit institutions		(1,400)	(1,042)	(1,983)
Proceeds from sale and maturities of financial investments, excluding deposits with credit institutions		958	790	1,921
Net (investments into)/withdrawals from deposits with credit institutions		(165)	(150)	88
Interest received		180	80	241
Net cash used in investing activities		(825)	(503)	(142)
Cash flow from financing activities
Payment of Restricted Tier 1 coupon	19	(6)	(6)	(12)
Proceeds from issue of interest-bearing liabilities and drawdowns on other borrowings		150	317	493
Repayment of interest-bearing liabilities and other borrowings		(318)	(262)	(342)
Principal repayment of lease liabilities		(65)	(69)	(148)
Payment of interest on lease liabilities		(24)	(24)	(49)
Interest paid		(41)	(56)	(66)
Net receipts/(payments) on settlement of hedging instruments		26	(10)	57
Dividends paid		(80)	(58)	(134)
Dividends paid to non-controlling interests		(3)	(2)	(2)
Net cash used in financing activities		(361)	(170)	(203)
Net (decrease)/increase in cash and cash equivalents		(436)	202	959
Cash and cash equivalents at beginning of period¹		2,362	1,479	1,479
Effect of exchange rate changes		(40)	(52)	(76)
Cash and cash equivalents at end of period¹	16	1,886	1,629	2,362

 

1.

Includes restricted cash of £93m (HY 2023: £84m; FY 2023: £87m) which is considered cash and cash equivalents along with cash balances classified as held for sale of £nil (HY 2023: £nil; FY 2023: £2m) and with bank overdrafts of £2m (HY 2023: £3m; FY 2023: £1m) which are not considered a component of cash and cash equivalents within Note 16.

 

Notes 1-21 form part of these Condensed Consolidated Financial Statements.

 

Bupa Finance plc

Condensed Consolidated Statement of Changes in Equity

for the six months ended 30 June 2024 (unaudited)

 

		Share Capital	Foreign exchange translation reserve	Property revaluation reserve	Cash flow hedge reserve	Income and expenditure reserve	Total attributable to shareholder of Bupa Finance plc	Restricted Tier 1 notes	Non-controlling interests	Total equity
For six months ended 30 June 2024	Note	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance as at 1 January 2024		200	241	601	(7)	5,648	6,683	297	18	6,998
Profit for the period		-	-	-	-	387	387	-	(11)	376
Other comprehensive income/(expense)
Realised revaluation profit on disposal of property		-	-	(8)	-	8	-	-	-	-
Foreign exchange translation differences on goodwill	7	-	(18)	-	-	-	(18)	-	-	(18)
Other foreign exchange translation differences		-	(70)	(6)	-	(22)	(98)	-	(1)	(99)
Net gain on hedge of net investment in overseas subsidiaries		-	25	-	-	-	25	-	-	25
Share of other comprehensive expense of equity-accounted investments		-	-	-	-	(4)	(4)	-	-	(4)
Change in fair value of financial investments through other comprehensive income		-	-	-	-	1	1	-	-	1
Change in ECL of financial investments through other comprehensive income		-	-	-	-	3	3	-	-	3
Change in cash flow hedge reserve		-	-	-	7	-	7	-	-	7
Release of foreign exchange translation reserve on derecognition of equity-accounted investments and subsidiaries		-	11	-	-	-	11	-	-	11
Other comprehensive (expense)/income for the period, net of taxation		-	(52)	(14)	7	(14)	(73)	-	(1)	(74)
Total comprehensive (expense)/income for the period		-	(52)	(14)	7	373	314	-	(12)	302
Payment of Restricted Tier 1 coupon, net of taxation	19	-	-	-	-	(5)	(5)	-	-	(5)
Recognition of share purchase liability	20	-	-	-	-	(111)	(111)	-	-	(111)
Acquisition of subsidiaries attributable to non-controlling interests		-	-	-	-	-	-	-	87	87
Disposal of subsidiaries attributable to non-controlling interests		-	-	-	-	-	-	-	(1)	(1)
Dividends to shareholder of the Company		-	-	-	-	(80)	(80)	-	-	(80)
Dividends paid to non-controlling interests		-	-	-	-	-	-	-	(3)	(3)
Balance as at 30 June 2024		200	189	587	-	5,825	6,801	297	89	7,187

 

Notes 1-21 form part of these Condensed Consolidated Financial Statements.

 

		Share Capital	Foreign exchange translation reserve	Property revaluation reserve	Cash flow hedge reserve	Income and expenditure reserve	Total attributable to shareholder of Bupa Finance plc	Restricted Tier 1 notes	Non-controlling interests	Total equity
For year ended 31 December 2023	Note	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance as at 1 January 2023		200	437	634	-	5,254	6,525	297	20	6,842
Profit for the year		-	-	-	-	538	538	-	2	540
Other comprehensive income/(expense)
Unrealised loss on revaluation of property		-	-	(15)	-	-	(15)	-	-	(15)
Realised revaluation profit on disposal of property		-	-	(5)	-	5	-	-	-	-
Foreign exchange translation differences on goodwill	7	-	(55)	-	-	-	(55)	-	-	(55)
Other foreign exchange translation differences		-	(212)	(13)	-	(8)	(233)	-	(2)	(235)
Net gain on hedge of net investment in overseas subsidiaries		-	73	-	-	-	73	-	-	73
Share of other comprehensive income of equity-accounted investments		-	-	-	-	2	2	-	-	2
Change in fair value of financial investments through other comprehensive income		-	-	-	-	(4)	(4)	-	-	(4)
Change in ECL of financial investments through other comprehensive income		-	-	-	-	1	1	-	-	1
Realised loss on disposal of financial investments at fair value through other comprehensive income		-	-	-	-	4	4	-	-	4
Change in cash flow hedge reserve		-	-	-	(7)	-	(7)	-	-	(7)
Release of foreign exchange translation reserve on closure of subsidiaries		-	(2)	-	-	-	(2)	-	-	(2)
Other comprehensive expense for the year, net of taxation		-	(196)	(33)	(7)	-	(236)	-	(2)	(238)
Total comprehensive (expense)/income for the year		-	(196)	(33)	(7)	538	302	-	-	302
Payment of Restricted Tier 1 coupon, net of taxation	19	-	-	-	-	(10)	(10)	-	-	(10)
Dividends to shareholder of the Company		-	-	-	-	(134)	(134)	-	-	(134)
Dividends paid to non-controlling interests		-	-	-	-	-	-	-	(2)	(2)
Balance as at 31 December 2023		200	241	601	(7)	5,648	6,683	297	18	6,998

 

Notes 1-21 form part of these Condensed Consolidated Financial Statements.

 

 

		Share Capital	Foreign exchange translation reserve	Property revaluation reserve	Income and expenditure reserve	Total attributable to shareholder of Bupa Finance plc	Restricted Tier 1 notes	Non-controlling interests	Total equity
For six months ended 30 June 2023	Note	£m	£m	£m	£m	£m	£m	£m	£m
Balance as at 1 January 2023		200	437	634	5,254	6,525	297	20	6,842
Profit for the period		-	-	-	240	240	-	2	242
Other comprehensive income/(expense)
Realised revaluation profit on disposal of property		-	-	(1)	1	-	-	-	-
Foreign exchange translation differences on goodwill	7	-	(92)	-	-	(92)	-	-	(92)
Other foreign exchange translation differences		-	(248)	(15)	4	(259)	-	(1)	(260)
Net gain on hedge of net investment in overseas subsidiaries		-	81	-	-	81	-	-	81
Share of other comprehensive expense of equity-accounted investments		-	-	-	(1)	(1)	-	-	(1)
Change in fair value of financial investments through other comprehensive income		-	-	-	(1)	(1)	-	-	(1)
Change in ECL of financial investments through other comprehensive income		-	-	-	1	1	-	-	1
Other comprehensive (expense)/income for the period, net of taxation		-	(259)	(16)	4	(271)	-	(1)	(272)
Total comprehensive (expense)/income for the period		-	(259)	(16)	244	(31)	-	1	(30)
Payment of Restricted Tier 1 coupon, net of taxation	19	-	-	-	(5)	(5)	-	-	(5)
Dividends to shareholder of the Company		-	-	-	(58)	(58)	-	-	(58)
Dividends paid to non-controlling interests		-	-	-	-	-	-	(2)	(2)
Balance as at 30 June 2023		200	178	618	5,435	6,431	297	19	6,747

 

Notes 1-21 form part of these Condensed Consolidated Financial Statements.

 

Bupa Finance plc

Notes to the Condensed Consolidated Financial Statements

for the six months ended 30 June 2024 (unaudited)

 

1   Basis of preparation

 

1.1   Basis of preparation

 

Bupa Finance plc (the 'Company'), a company incorporated in England and Wales and domiciled in the United Kingdom, 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 2024 comprise those of the Company and its subsidiary companies.

 

The interim financial statements have been prepared in accordance with UK-adopted International Accounting Standard 34 Interim Financial Reporting and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. The interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2023, which have been prepared in accordance with UK-adopted international accounting standards, in conformity with the requirements of the Companies Act 2006. The interim financial statements have been prepared on the basis of the accounting policies set out in the annual financial statements for the year ended 31 December 2023 updated for the application of new and amended accounting standards as set out in Note 1.4.

 

The interim financial statements were approved by the Board of Directors of Bupa Finance plc on 31 July 2024.

 

The financial information contained in these interim financial statements does not constitute statutory accounts of Bupa Finance plc within the meaning of Section 434 of the Companies Act 2006. The comparative figures for the financial year ended 31 December 2023 are not the Company's statutory accounts for that 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, along with scenario-based stress testing and reverse stress testing, the Directors have concluded that the Group has adequate resources to operate for at least the next 12 months from the approval of these financial statements. This assessment considered forecast and reasonably possible adverse changes to the Group's regulatory solvency, liquidity, access to funding and trading profitability over the next 12 months.

 

The assessment identified the risks and uncertainties most likely to impact the Group and considered the impact to the Group's businesses under a number of reasonably plausible severe scenarios as well as consideration of contingent liabilities.

 

Our most severe reasonably possible scenarios considered multiple factors causing significant damage to Bupa's market position, alongside economic stresses. Under such scenarios, significant short-term reductions in planned profitability would arise, however the Group would remain within its liquidity and solvency risk appetites and would continue to be a going concern. If necessary, management actions would allow downside impacts to be mitigated, and risk appetites controlled, by reducing expenditure, obtaining additional funding or divesting investments or businesses. Within its liquidity resources, the Group makes use of a £900m revolving credit facility ('RCF') as described in Note 17. The Group expects to remain compliant with the RCF's covenants under stressed scenarios and may further draw down on the RCF in order to meet liquidity needs.

 

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 2024 Results Announcement. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review of the Half Year 2024 Results Announcement.

 

1.3   Accounting estimates and judgements

 

The preparation of financial statements requires the use of certain accounting estimates and assumptions that affect the reported assets, liabilities, income and expenses. It also requires management to exercise judgement in applying the Group's accounting policies.

 

The areas involving a higher degree of judgement or complexity, or where estimates are significant to the Condensed Consolidated Financial Statements, are set out below. Changes in these estimates could lead to a material adjustment to the carrying value of the assets and liabilities in the next financial year. Further detail is in the related notes.

Area	Details	Note
Goodwill and intangible assets	Goodwill and intangible assets are recognised on acquired businesses based on fair values at the date of acquisition. Goodwill and intangible assets with indefinite lives are tested for impairment on an annual basis, or more frequently when there are indicators of impairment. Other intangible assets are tested for impairment when there are indicators of impairment.   As at 30 June 2024, all CGUs and intangible assets were reviewed for indicators of impairment. A full assessment was performed on Bupa Dental Care UK, the results of which are included in Note 7.   Sources of estimation uncertainty Impairment tests include a number of sources of estimation uncertainty as the key assumptions used when modelling the recoverable amount are the discount rate, terminal growth rate and the forecast cash flows. Estimation uncertainties within these cash flows vary by cash-generating unit (CGU). For provision business these include the number of customers, available clinician hours, fee rates and operating expenses.   Accounting judgements Judgement has been applied to determine whether there is an indication of impairment to intangible assets and goodwill or an indication that prior impairments of intangible assets should be reversed. In making these judgements, the Group has considered current trading and future plans associated with each of the assets, along with external market factors, in order to assess whether a full valuation is required to assess for impairments or reversal of impairments.	7
Property valuations	The Group has a significant portfolio of care home, hospital and office properties. These are subject to periodic and at least triennial valuations performed by external independent valuers, with directors' valuations performed in intervening years. In addition, the Group has a significant portfolio of investment properties, primarily retirement villages in New Zealand. These properties are revalued annually.   Sources of estimation uncertainty Significant assumptions for freehold properties are normalised earnings, average occupancy and capitalisation rates, whereas for investment property significant assumptions are discount and capital growth rates.   Accounting judgements In valuing care home property, a judgement is made on the highest and best use of the property. In the majority of cases this leads to the property being valued as part of a group of assets making up a going concern business using market-based assumptions. The business is valued on a fair maintainable trade basis with the fair value thus calculated being allocated to plant and equipment and bed licences where applicable at net book value (as a proxy for fair value), with the residual value being allocated to the property.	8, 9
Insurance contracts	Accounting judgements Premium allocation approach (PAA) The Group exercises judgement in determining whether the PAA eligibility criteria are met at initial recognition. For a small number of insurance contracts, which have a coverage period that is greater than 12 months, the Group elects to apply the PAA, if at the inception of the contract the Group reasonably expects that it will provide a liability for remaining coverage (LFRC) that would not differ materially from the General Measurement Model (GMM).	14
	Sources of estimation uncertainty Best estimate of claims provisioning Estimates included in the insurance contract liabilities include expected claims payments and expenses required to settle existing insurance contract obligations. The key assumptions used in the calculation of the liability for incurred claims (LFIC) include claims development, claims costs inflation, medical trends and seasonality. Uncertainty exists particularly in relation to estimating the frequency and severity of incurred claims for the most recent months prior to the period end.
Niva Bupa acquisition	The Group has acquired a controlling interest in Niva Bupa on 8 January 2024. The transaction has been accounted for using the acquisition method where identifiable assets and liabilities acquired have been measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest.   Accounting judgements The identification and valuation of intangible assets arising on business combinations is subject to a degree of judgement. We have engaged an independent third party to assist with the identification and valuation process. A customer relationship intangible has been recognised and valued based on the present value of the marginal profit from renewals of existing customers. This will be amortised over 12 years.   Sources of estimation uncertainty As part of the transaction, put options have been issued to non-controlling interest parties whereby the Group can be required to acquire additional shares from non-controlling interest parties' shareholdings of Niva Bupa between 1 January 2027 and 30 June 2030, at fair market value, if a successful IPO of Niva Bupa has not been completed. The Group has valued the share purchase liability based on an estimate of the discounted amount that could be required to settle the liability. Estimation uncertainty arises as the future fair market value, and the timing of exercise of the options are unknown.	20
Provisions and contingent liability	The Group has circumstances arising in the ordinary course of business, including losses which might arise from  litigation, disputes, and interpretation of tax law or local regulations. Judgement is exercised in determining whether  the circumstances should give rise to the recognition of provisions or disclosure of contingent liabilities. In the case of material contingent liabilities further judgement is required in arriving at appropriate disclosure of such matters.    Accounting judgements Significant judgement was applied in the prior year in assessing whether a contingent liability or provision existed as a result of the ruling issued by the Supreme Court in Chile which obliges Isapres to make use of statutory Risk Factor Tables (used to adjust the price of insurance contracts based on risk factors such as age). The issuance of legislation in May 2024 and guidance subsequently issued by the Superintendent of Health (SIS) on 7 June 2024, which provided clarity on the implementation of this legislation on the Isapre industry via a payment plan to be approved by the SIS, has resulted in the Group's recognition of a provision at 30 June 2024.   Sources of estimation uncertainty The calculation of the amount of the provision remains an estimate due to uncertainty on the finalisation of the payment plan which is subject to SIS review and approval.	18

 

1.4   New and amended accounting standards

 

Except for the changes detailed below, 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 2023.

 

1.4.1   New and amended standards adopted by the Group

 

Non-current Liabilities with Covenants (Amendments to IAS 1)

The Group has adopted Non-current Liabilities with Covenants (Amendments to IAS 1) from 1 January 2024. The amendments clarify that the need to comply with covenants beyond the reporting date does not prevent a liability from being classified as non-current. Entities must disclose any such liability balances along with the presence and nature of relevant covenants and additionally disclose if the covenants are likely to be breached within the following twelve months. As a result of adopting these amendments the Group has retrospectively reclassified drawings on its revolving credit facility from current liabilities to non-current liabilities. The amount of drawings reclassified was £380m at 30 June 2023 and £nil at 31 December 2023. The revolving credit facility is disclosed in Note 17, together with a split of borrowings between non-current and current. Additional disclosures required by these amendments will be made in the annual financial statements for the year ended 31 December 2024. There was no further impact on these financial statements from adopting the amendments.

 

Other

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.

 

1.4.2   Impact of standards issued but not yet applied by the Group

 

IFRS 18 Presentation and Disclosure in Financial Statements

In April 2024 the International Accounting Standards Board (IASB) issued IFRS 18 Presentation and Disclosure in Financial Statements. IFRS 18 will supersede IAS 1 Presentation of Financial Statements, providing general presentation requirements for financial statements prepared in line with IFRS accounting standards.

 

The standard requires new subtotals in the income statement, including operating profit. Entities must provide disclosures about management-defined performance measures. The standard also provides additional guidance on the aggregation and disaggregation of data in financial statements.

 

IFRS 18 is effective from 1 January 2027. The application of this standard is currently being evaluated by the Group. The standard is expected to impact presentation and disclosure, but have no impact on recognition and measurement.

 

IFRS 19 Subsidiaries without Public Accountability: Disclosures

In May 2024 the IASB issued IFRS 19 Subsidiaries without Public Accountability: Disclosures. IFRS 19 will be available to subsidiary entities applying IFRS that are not publicly accountable and whose parent prepares publicly-available consolidated financial statements that comply with IFRS.

 

IFRS 19 provides reduced disclosure requirements, replacing the disclosure requirements of other IFRS accounting standards, but does not change recognition and measurement requirements.

 

Eligible entities may apply IFRS 19 from 1 January 2027. As the Group is not an eligible subsidiary, it will not apply IFRS 19, and the standard will have no impact.

 

Amendments to the Classification and Measurement of Financial Instruments-Amendments to IFRS 9 and IFRS 7

 

In May 2024 the IASB issued Amendments to the Classification and Measurement of Financial Instruments-Amendments to IFRS 9 and IFRS 7.

 

The amendments clarify the date on which a financial asset or financial liability settled through an electronic payment system is derecognised. An accounting policy option is available to derecognise a financial liability before cash is delivered on the settlement date if specified criteria are met. The amendments also provide clarifications on the classification for certain financial assets, such as those with environmental, social and corporate governance and similar features, and amend certain disclosure requirements.

 

The amendments are effective from 1 January 2026. The application of these amendments is currently being evaluated by the Group.

 

1.5   Foreign exchange

 

The following significant exchange rates applied during the period:

 

	Average rate				Closing rate
	30 June 2024	31 December 2023	30 June 2023		30 June 2024	31 December 2023	30 June 2023
Australian dollar	1.92	1.87	1.83		1.89	1.87	1.91
Brazilian real	6.43	6.21	6.25		7.06	6.19	6.09
Chilean peso	1,189.89	1,045.33	994.36		1,189.54	1,123.02	1,017.72
Danish krone	8.73	8.57	8.50		8.80	8.61	8.66
Egyptian pound	52.62	38.17	37.60		60.71	39.42	39.22
Euro	1.17	1.15	1.14		1.18	1.15	1.16
Hong Kong dollar	9.89	9.74	9.67		9.87	9.95	9.95
Indian rupee	105.30	102.71	101.40		105.38	106.08	104.16
Mexican peso	21.65	22.05	22.40		23.18	21.62	21.78
New Zealand dollar	2.08	2.03	1.98		2.07	2.02	2.07
Polish zloty	5.05	5.22	5.28		5.09	5.01	5.16
Saudi riyal	4.75	4.67	4.63		4.74	4.78	4.76
Turkish lira¹	41.38	37.66	33.04		41.38	37.66	33.04
US dollar	1.27	1.24	1.23		1.26	1.27	1.27

 

1.	Closing rate of Turkish lira applied to average rate due to the application of IAS 29.

 

Türkiye is a hyperinflationary economy and IAS 29 Financial Reporting in Hyperinflationary Economies has been applied from June 2022 onwards. As a consequence, the results and balances for the Group's Turkish operations have been adjusted for changes in the general purchasing power of the Turkish lira. In order to make this adjustment the Group refers to the CPI index published by the Turkish Statistical Institute. The value of CPI at 30 June 2024 was 2,319.23 (HY 2023: 1,351.59; FY 2023: 1,859.40) and the movement in CPI for the period ended 30 June 2024 was 459.83 (HY 2023: 223.19; FY 2023: 731.00), an increase of 24.7% (HY 2023: 19.8%; FY 2023: 64.8%).

 

A loss of £5m (HY 2023: £4m; FY 2023: £18m) arising from the devaluation of net monetary assets has been recognised within net financial expense in the Condensed Consolidated Income Statement. This includes the impact of indexing amounts in the Condensed Consolidated Income Statement for the application of IAS 29, reducing profit before taxation by £9m for the period (HY 2023: £5m; FY 2023: £10m).

 

For segmental reporting purposes, the net impact of applying hyperinflationary accounting has been excluded from underlying profit and included within realised and unrealised FX gain/loss as this is how the Group measures the performance of the business.

 

All Turkish lira amounts are translated to the Group's presentation currency of sterling, using the closing exchange rate in effect on 30 June 2024 of 41.38 (HY 2023: 33.04; FY 2023: 37.66). The impact of this adjustment is recorded within other foreign exchange translation differences in the Condensed Consolidated Statement of Comprehensive Income and within the foreign exchange translation reserve in the Condensed Consolidated Statement of Financial Position. The Group recognises the remaining exchange difference arising on consolidation within other foreign exchange translation differences through other comprehensive income in the foreign exchange translation reserve.

 

2   Operating segments

 

The Group operates in three Market Units, Bupa Asia Pacific; Europe and Latin America; and Bupa Global, India and UK. Management monitors the operating results of the Market Units separately to assess performance and make decisions about the allocation of resources. Following the acquisition of a controlling interest in Niva Bupa on 8 January 2024, the financial results of Niva Bupa have been fully consolidated into the Bupa Global and UK Market Unit from the acquisition date and the Market Unit renamed Bupa Global, India and UK (BGIUK). Other businesses represents the Group's associate investment, Bupa Arabia, and for 2023, included Niva Bupa's results as an associate investment. 

 

Reportable Segments	Services and Products
Bupa Asia Pacific	Bupa Health Insurance: Health insurance, international health cover in Australia. Bupa Health Services: Health provision business, comprising dental, optical, audiology, medical assessment services, health centres and healthcare for the Australian Defence Force. Bupa Villages and Aged Care Australia: Nursing, residential, respite care and residential villages. Bupa Villages and Aged Care New Zealand: Nursing, residential, respite care and residential villages. Bupa Hong Kong: Domestic health insurance, primary healthcare and day care clinics including diagnostics.
Europe and Latin 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, rehabilitation centres and health clinics in Spain. Sanitas Mayores: Nursing, residential and respite care in care homes and day centres in Spain. LUX MED: Medical subscriptions, health insurance, and the management and operation of diagnostics, health clinics and hospitals in Poland. Bupa Acıbadem Sigorta: Domestic health insurance in Türkiye. Bupa Chile: Domestic health funding and the management and operation of health clinics and hospitals in Chile. Care Plus: Domestic health insurance in Brazil. Bupa Mexico: Health insurance and the management and operation of a hospital in Mexico. Bupa Global Latin America: International health insurance.
Bupa Global, India 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. Associate: Highway to Health (United States of America) (operating as GeoBlue). From 2024: Subsidiary: Niva Bupa (India): Health insurance and related products in India.
Other businesses	Associate: Bupa Arabia (Kingdom of Saudi Arabia). Prior to 2024: Associate: Niva Bupa (India): Health insurance and related products in India.

 

A key performance measure of operating segments utilised by the Group is underlying profit. Underlying profit is used to distinguish business performance 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 - these impairments are considered to be one-off and not reflective of the in-year trading performance of the business.
-	Short-term fluctuations on investment return - underlying profit includes an expected long-term investment return over the period for return-seeking financial assets. Any variance between the total investment return (including realised and unrealised gains) and the expected return over the period is not included in underlying profit. These fluctuations are not related to underlying trading performance.
-	Net gains/losses on disposal of businesses and transaction costs on business combinations - gains/losses on disposal of businesses that are material and one-off in nature to the reportable segment are not considered part of the continuing business. Transaction costs that relate to material acquisitions or disposals are not related to the ongoing trading performance of the business.
-	Net property revaluation gains/losses - short-term fluctuations which would distort underlying trading performance. This includes deficit/surplus on the revaluation of freehold properties and property impairment losses.
-	Realised and unrealised foreign exchange gains/losses - fluctuations outside of management control, which would distort underlying trading performance. This includes the net impact of applying hyperinflationary accounting.
-	Amortisation of bed licences - following the Australian Government's announcement of the deregulation of bed licences from 1 July 2024, the amortisation term was reviewed and updated from having an indefinite useful life to amortising over the period to 1 July 2024. In May 2024, the Australian Government announced that the deregulation would be delayed until 1 July 2025 and therefore the remaining balance will be amortised over this longer time period. The impact of this is not considered reflective of the trading performance of the business.
-	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.

 

	Bupa Asia Pacific	Europe and Latin America	Bupa Global, India and UK¹	Other businesses¹,²	Group Functions	Adjustments³	Total
For six months ended 30 June 2024	£m	£m	£m	£m	£m	£m	£m
Revenues
Insurance revenue	2,349	1,746	1,839	-	-	3	5,937
Inter-Market Unit revenue	(31)	-	31	-	-	-	-
Insurance revenue for reportable segments	2,318	1,746	1,870	-	-	3	5,937
Care, health and other customer contract revenue	725	925	653	-	-	-	2,303
Other revenue	28	7	1	5	-	1	42
Non-insurance revenue for reportable segments	753	932	654	5	-	1	2,345
Total revenue for reportable segments	3,071	2,678	2,524	5	-	4	8,282
Segmental result
Underlying profit for reportable segments	231	156	65	56	2	-	510
Borrowing costs	-	-	(1)	-	(45)	-	(46)
Group investment funding	-	-	-	-	(10)	-	(10)
Consolidated underlying profit before taxation expense	231	156	64	56	(53)	-	454
Non-underlying items:
Short-term fluctuation on investment returns	(3)	-	(8)	-	(1)	-	(12)
Net (loss)/gain on disposal of businesses and transaction costs on business combinations	(5)	1	(6)	-	-	-	(10)
Realised and unrealised FX gain/(loss)	-	-	21	-	(4)	(9)	8
Amortisation of bed licenses	(12)	-	-	-	-	-	(12)
Other non-underlying items²,⁴	-	(218)	(10)	309	-	-	81
Total non-underlying items							55
Consolidated profit before taxation expense							509

 

1.	At HY 2024 Niva Bupa has been fully consolidated into the Bupa Global, India and UK Market Unit from the acquisition date and the entity is no longer included in Other businesses.
2.	Other businesses includes a £309m gain as a result of the Group's existing stake in Niva Bupa, prior to the majority stake acquistion, having been remeasured to fair value (see Note 20).
3.	Includes impacts of applying IAS 29.
4.	Europe and Latin America includes the impact of recognising a £215m provision in relation to Isapre Cruz Blanca in Chile and the retrospective liability relating to statutory Risk Factor Tables (see Note 18). This is excluded from underlying profit as it is considered a one-off material retrospective matter which is not reflective of on-going trading performance.

 

	Bupa Asia Pacific	Europe and Latin America	Bupa Global and UK	Other businesses	Group Functions	Adjustments¹	Total
For six months ended 30 June 2023	£m	£m	£m	£m	£m	£m	£m
Revenues
Insurance revenue	2,132	1,667	1,426	-	-	9	5,234
Inter-Market Unit revenue	(29)	-	29	-	-	-	-
Insurance revenue for reportable segments	2,103	1,667	1,455	-	-	9	5,234
Care, health and other customer contract revenue	644	880	606	-	-	-	2,130
Other revenue	26	5	2	4	-	-	37
Non-insurance revenue for reportable segments	670	885	608	4	-	-	2,167
Total revenue for reportable segments	2,773	2,552	2,063	4	-	9	7,401
Segmental result
Underlying profit for reportable segments	40	145	142	43	(3)	-	367
Borrowing costs	-	-	-	-	(38)	-	(38)
Group investment funding	-	-	-	-	(8)	-	(8)
Consolidated underlying profit before taxation expense	40	145	142	43	(49)	-	321
Non-underlying items:
Short-term fluctuation on investment returns	4	-	4	-	(2)	-	6
Net loss on disposal of businesses and transaction costs on business combinations	(1)	-	(1)	-	-	-	(2)
Realised and unrealised FX (loss)/gain	-	(1)	13	2	3	(5)	12
Amortisation of bed licenses	(16)	-	-	-	-	-	(16)
Other non-underlying items²	-	(4)	(7)	-	-	-	(11)
Total non-underlying items							(11)
Consolidated profit before taxation expense							310

 

1.	Includes impacts of applying IAS 29.
2.	Other non-underlying items includes £4m and £7m relating to restructuring costs in Europe and Latin America and Bupa Global and UK.

 

	Bupa Asia Pacific	Europe and Latin America	Bupa Global and UK	Other businesses	Group Functions	Adjustments¹	Total
For year ended 31 December 2023	£m	£m	£m	£m	£m	£m	£m
Revenues
Insurance revenue	4,412	3,359	2,935	-	-	64	10,770
Inter-Market Unit revenue	(59)	-	59	-	-	-	-
Insurance revenue for reportable segments	4,353	3,359	2,994	-	-	64	10,770
Care, health and other customer contract revenue	1,320	1,710	1,238	-	-	-	4,268
Other revenue	53	14	3	8	-	-	78
Non-insurance revenue for reportable segments	1,373	1,724	1,241	8	-	-	4,346
Total revenue for reportable segments	5,726	5,083	4,235	8	-	64	15,116
Segmental result
Underlying profit for reportable segments	151	358	263	85	(2)	-	855
Borrowing costs	-	-	-	-	(82)	-	(82)
Group investment funding	-	-	-	-	(26)	-	(26)
Consolidated underlying profit before taxation expense	151	358	263	85	(110)	-	747
Non-underlying items:
Impairments of intangible assets and goodwill arising on business combinations	-	(1)	-	-	-	-	(1)
Short-term fluctuation on investment returns	12	-	16	-	3	-	31
Net (loss)/gain on disposal of businesses and transaction costs on business combinations	(2)	(9)	10	-	-	-	(1)
Net property revaluation loss	(3)	-	(18)	-	-	-	(21)
Realised and unrealised FX (loss)/gain	-	(7)	12	2	5	(10)	2
Amortisation of bed licenses	(32)	-	-	-	-	-	(32)
Other non-underlying items²	-	(17)	(18)	27	-	-	(8)
Total non-underlying items							(30)
Consolidated profit before taxation expense							717

 

1.	Includes impacts of applying IAS 29.
2.	Other non-underlying items includes £17m and £18m relating to restructuring costs in Europe and Latin America and Bupa Global and UK. Other businesses includes a £27m dilution gain on the issue of share capital in Niva Bupa to external investors.

 

3   Non-insurance revenues

 

Non-insurance revenue has been analysed at Business Unit level reflecting the nature of services provided by each geography that is reported internally to management.

	Care, health and other customer contract revenue	Other revenue	Total non-insurance revenues
For six months ended 30 June 2024	£m	£m	£m
Bupa Health Insurance	4	2	6
Bupa Health Services	331	1	332
Bupa Villages and Aged Care Australia	204	15	219
Bupa Villages and Aged Care New Zealand	72	10	82
Bupa Hong Kong	114	-	114
Bupa Asia Pacific	725	28	753
Sanitas Seguros	7	-	7
Sanitas Dental	74	3	77
Sanitas Hospitales and New Services	101	-	101
Sanitas Mayores	83	-	83
LUX MED	457	-	457
Bupa Acıbadem Sigorta	-	3	3
Bupa Chile	188	-	188
Care Plus	5	-	5
Bupa Mexico	10	-	10
Bupa Global Latin America	-	1	1
Europe and Latin America	925	7	932
Bupa UK Insurance	13	-	13
Bupa Dental Care UK	269	-	269
Bupa Care Services	245	-	245
Bupa Health Services	126	1	127
Bupa Global, India and UK	653	1	654
Other	-	5	5
Other businesses	-	5	5
Adjustments¹	-	1	1
Consolidated non-insurance revenues	2,303	42	2,345

 

1.	Includes impacts of applying IAS 29.

 

	Care, health and other customer contract revenue	Other revenue	Total non-insurance revenues
For six months ended 30 June 2023	£m	£m	£m
Bupa Health Insurance	5	1	6
Bupa Health Services	295	-	295
Bupa Villages and Aged Care Australia	165	16	181
Bupa Villages and Aged Care New Zealand	77	9	86
Bupa Hong Kong	102	-	102
Bupa Asia Pacific	644	26	670
Sanitas Seguros	7	1	8
Sanitas Dental	72	3	75
Sanitas Hospitales and New Services	132	-	132
Sanitas Mayores	80	-	80
LUX MED	371	-	371
Bupa Acıbadem Sigorta	-	1	1
Bupa Chile	207	-	207
Care Plus	3	-	3
Bupa Mexico	8	-	8
Europe and Latin America	880	5	885
Bupa UK Insurance	12	1	13
Bupa Dental Care UK	265	-	265
Bupa Care Services	228	-	228
Bupa Health Services	101	1	102
Bupa Global and UK	606	2	608
Other	-	4	4
Other businesses	-	4	4
Consolidated non-insurance revenues	2,130	37	2,167

 

	Care, health and other customer contract revenue	Other revenue	Total non-insurance revenues
For year ended 31 December 2023	£m	£m	£m
Bupa Health Insurance	9	3	12
Bupa Health Services	580	-	580
Bupa Villages and Aged Care Australia	357	32	389
Bupa Villages and Aged Care New Zealand	158	18	176
Bupa Hong Kong	216	-	216
Bupa Asia Pacific	1,320	53	1,373
Sanitas Seguros	13	3	16
Sanitas Dental	134	4	138
Sanitas Hospitales and New Services	229	1	230
Sanitas Mayores	162	-	162
LUX MED	748	1	749
Bupa Acıbadem Sigorta	-	2	2
Bupa Chile	402	1	403
Care Plus	6	-	6
Bupa Mexico	16	1	17
Bupa Global Latin America	-	1	1
Europe and Latin America	1,710	14	1,724
Bupa UK Insurance	25	1	26
Bupa Dental Care UK	518	1	519
Bupa Care Services	474	-	474
Bupa Health Services	221	1	222
Bupa Global and UK	1,238	3	1,241
Other	-	8	8
Other businesses	-	8	8
Consolidated non-insurance revenues	4,268	78	4,346

 

4   Other income and charges

 

	For six months ended 30 June 2024	For six months ended 30 June 2023	For year ended 31 December 2023
	£m	£m	£m
Gain on dilution of ownership in Niva Bupa	-	-	27
Fair value gain on acquisition of Niva Bupa	309	-	-
Net loss on disposal and restructuring of businesses	(9)	(2)	(1)
Loss on revaluation of property	-	-	(21)
Net gain on disposal of property, plant and equipment	2	3	6
Surplus on fair value of investment property	11	12	31
Total other income and charges	313	13	42

 

5   Financial income and expense

 

Financial income

	For six months ended 30 June 2024	For six months ended 30 June 2023	For year ended 31 December 2023
	£m	£m	£m
Interest income:
Investments at fair value through profit or loss	32	25	48
Investments at fair value through other comprehensive income	23	5	20
Investments at amortised cost	156	86	225
Net realised gain/(loss):
Net realised gain on investments at fair value through profit or loss	2	7	16
Net realised loss on financial investments at fair value through other comprehensive income	-	-	(4)
Net movement in fair value:
Changes in share purchase liability¹	(9)	-	-
Investments at fair value through profit or loss	10	19	44
Net foreign exchange translation gain	25	16	14
Total financial income	239	158	363

 

1.	See Note 20 for details of the share purchase liability.

 

Financial expense

	For six months ended 30 June 2024	For six months ended 30 June 2023	For year ended 31 December 2023
	£m	£m	£m
Interest expense on financial liabilities at amortised cost	55	54	116
Finance charges in respect of leases and restoration provisions	25	25	50
Other financial expense	20	12	24
Total financial expense	100	91	190

 

Other financial expense for the six months ended 30 June 2024 includes £12m (HY 2023: £10m; FY 2023: £20m) 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.

 

5.1   Insurance financial income and expense

 

The Group's insurance financial expense of £9m (HY 2023: £8m; FY 2023: £25m) arises from the impact of unwinding discount rates and any change in discount rates from the beginning of the year, which causes movement in the overall insurance contract liability. Discounting of insurance contracts is only applied by exception.

 

There is an option to disaggregate any insurance financial income or expense between other comprehensive income and the income statement. Bupa has elected to recognise all insurance financial expense in the Condensed Consolidated Income Statement.

 

6   Taxation expense

 

The Group's effective taxation rate for the period was 26% (HY 2023: 22%; FY 2023: 25%), which is in line with the UK corporation taxation rate of 25%.

 

The Group operates in the UK where new tax legislation to implement a global minimum top-up tax was enacted in July 2023 and became effective from 1 January 2024.

 

The Group has applied a temporary mandatory relief from deferred tax accounting for the impacts of the top-up tax, and instead accounts for it as a current tax when it is incurred. The current tax charge with respect to the top-up tax for the period was £nil (HY 2023: £nil; FY 2023: £nil).

 

7   Goodwill and intangible assets

 

	Goodwill	Computer software	Brands/ trademarks	Customer relationships	Other¹	Total
At 30 June 2024	£m	£m	£m	£m	£m	£m
Net book value at beginning of period	1,961	346	105	178	70	2,660
Assets arising on business combinations	558	3	1	38	1	601
Additions	-	55	-	-	1	56
Disposals	(6)	(2)	-	-	-	(8)
Amortisation	-	(44)	(4)	(15)	(16)	(79)
Other	-	(1)	-	-	-	(1)
Foreign exchange	(18)	(4)	(4)	(2)	-	(28)
Net book value at end of period	2,495	353	98	199	56	3,201

 

	Goodwill	Computer software	Brands/ trademarks	Customer relationships	Other¹	Total
At 31 December 2023	£m	£m	£m	£m	£m	£m
Net book value at beginning of period	1,981	339	120	187	113	2,740
Assets arising on business combinations	37	1	1	20	-	59
Additions	-	117	-	-	-	117
Disposals	(2)	-	-	-	-	(2)
Amortisation	-	(82)	(8)	(29)	(40)	(159)
Impairment loss	-	(16)	(1)	-	-	(17)
Other	-	(6)	-	-	-	(6)
Foreign exchange	(55)	(7)	(7)	-	(3)	(72)
Net book value at end of period	1,961	346	105	178	70	2,660

 

	Goodwill	Computer software	Brands/ trademarks	Customer relationships	Other¹	Total
At 30 June 2023	£m	£m	£m	£m	£m	£m
Net book value at beginning of period	1,981	339	120	187	113	2,740
Assets arising on business combinations	5	1	-	15	10	31
Additions	-	51	-	-	-	51
Amortisation	-	(38)	(4)	(16)	(20)	(78)
Other	-	(1)	-	-	-	(1)
Foreign exchange	(92)	(9)	-	(1)	(8)	(110)
Net book value at end of period	1,894	343	116	185	95	2,633

 

1.	Predominantly comprises bed licences, distribution networks and licences to operate care homes.

 

Goodwill and intangible assets of £3,201m (HY 2023: £2,633m; FY 2023: £2,660m) include £353m (HY 2023: £396m; FY 2023: £353m) attributable to other intangible assets arising on business combinations comprising brands/trademarks, customer relationships and other in the above table.

 

Computer software assets with a net book value of £353m (HY 2023: £343m; FY 2023: £346m) include £238m (HY 2023: £255m; FY 2023: £240m) attributable to capitalised internal development costs. The cost attributable to these assets is £546m (HY 2023: £551m; FY 2023: £526m). £48m of costs (HY 2023: £47m; FY 2023: £101m) were capitalised in the period.

 

Goodwill by CGU is as follows:

	At 30 June 2024	At 31 December 2023	At 30 June 2023
	£m	£m	£m
Bupa Asia Pacific
Bupa Australia Health Insurance	806	817	801
Bupa Health Services Australia	273	282	278
Hong Kong	123	122	122
Europe and Latin America
LUX MED	288	287	271
Sanitas Seguros	72	62	53
Sanitas Mayores	21	21	21
Bupa Acıbadem Sigorta	60	52	44
Care Plus	36	41	30
Other	10	11	11
Bupa Global, India and UK
Niva Bupa	536	-	-
Bupa Dental Care UK	192	191	191
Bupa Global	68	68	68
Other	10	7	4
Total	2,495	1,961	1,894

 

Impairment testing of goodwill and indefinite life intangible assets

 

Goodwill and intangible assets with an indefinite useful life are tested at least annually for impairment in accordance with IAS 36 Impairment of Assets and IAS 38 Intangible Assets. As at 30 June 2024, all CGUs and intangible assets were reviewed for indicators of impairment. Where impairment indicators were identified an impairment test was carried out by comparing the net carrying value with the recoverable amount, using value in use calculations and based on the latest cash flow forecasts for CGUs as at 30 June 2024.

 

Goodwill of £536m has been recognised in the period as a result of the additional shares acquired in Niva Bupa (see Note 20) both from the write-up of the previously held investment (£321m) and the newly acquired shares (£215m). As the acquisition took place during the period, the Directors consider the acquisition price represents fair value and that there are no indicators of impairment at 30 June 2024. Future assessments of goodwill impairment will consider the most appropriate valuation methodology. This may be based on either fair value less costs of disposal or a listed reference price if an initial public offering of shares takes place rather than value in use, due to the long term time horizon of forecast business growth. On 1 July 2024 Niva Bupa filed a draft red herring prospectus with the Securities and Exchange Board of India.

 

Management continues to closely monitor the headroom on Bupa Dental Care UK, following the impairments recognised in 2022, to ascertain whether any reversals to impairments of intangible assets or property, plant and equipment should be recognised. Headroom at 30 June 2024 is £57m (HY 2023: £33m; FY 2023: £72m), with the decrease in the period driven by increases in the net assets of the CGU relative to the recoverable amount calculated on a value in use basis. Sensitivities of the headroom to changes in key assumptions are included in the table below.

 

	Headroom	Discount rate	Terminal growth rate	Reduction in headroom from 1% increase in discount rate	Reduction in headroom from 0.5% reduction in terminal growth rate	Reduction in headroom from 10% reduction in cash flows
	£m	%	%	£m	£m	£m
Bupa Dental Care UK	57	11.4	2.1	(37)	(15)	(29)

 

8   Property, plant and equipment

	At 30 June 2024	At 31 December 2023	At 30 June 2023
	£m	£m	£m
Net book value at beginning of period	3,605	3,691	3,691
Assets arising on business combinations	18	5	1
Additions	147	337	145
Transfer to assets held for sale	-	(32)	(2)
Disposals	(9)	(15)	(4)
Revaluations	-	(36)	-
Remeasurements	31	63	35
Depreciation charge for the period	(159)	(312)	(157)
Other	1	-	-
Foreign exchange	(51)	(96)	(96)
Net book value at end of period	3,583	3,605	3,613

 

Property, plant and equipment are the physical assets or rights to use leased assets, which are utilised by the Group to carry out business activities and generate revenues and profits. The majority of assets held relate to care homes, hospital properties, equipment and office buildings. Leased right-of-use assets relate primarily to property leases.

 

Freehold properties are initially measured at cost and subsequently at revalued amount less accumulated depreciation and impairment losses. These properties are subject to external valuations at least every three years. In years where a full external valuation is not completed, a directors' valuation is conducted based on significant underlying assumptions such as cash flows and other market variables. An internal review of the significant underlying assumptions is conducted during interim periods. Consideration is also given to whether there are any factors which indicate a full out-of-cycle external revaluation is required. Care homes, clinics and hospital freehold property valuations are either determined based on a capitalisation of earnings approach where each facility's normalised earnings are calculated based on what a reasonably efficient operator could be expected to achieve then 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 2024. An internal review of the significant underlying assumptions underpinning the property valuations as at 30 June 2024 resulted in no uplifts or write-downs in respect of owned property (HY 2023: no uplifts or write-downs, FY 2023: write-downs of £36m).

 

Impairment testing of tangible assets

 

Right-of-use assets have been reviewed for indicators of impairment as at 30 June 2024. Where impairment indicators are identified an impairment test is carried out by comparing the net carrying value with the recoverable amount, using the higher of fair value or the value in use based on the latest cash flow forecasts for CGUs.

 

No impairments have been identified as at 30 June 2024 (HY 2023: £nil; FY 2023: £nil).

 

9   Investment property

 

	At 30 June 2024	At 31 December 2023	At 30 June 2023
	£m	£m	£m
At beginning of period	776	750	750
Additions	12	38	13
Transfer to assets held for sale	-	(2)	-
Increase in fair value	11	32	12
Foreign exchange	(20)	(42)	(58)
At end of period	779	776	717

 

Investment properties are physical assets that are not occupied by the Group and are leased to third parties to generate rental income.

 

Investment properties are initially measured at cost and subsequently at fair value, determined individually, on a basis appropriate to the purpose for which the property is intended and consistent with market transactions for similar properties in the same location. Where no active market exists, as is the case for retirement villages where each village is unique due to building configuration and location, these properties are valued using discounted cash flow projections. Investment property is revalued externally at least annually, with any gain or loss arising from a change in fair value recognised in the Condensed Consolidated Income Statement within other income and charges.

 

The carrying value of investment properties primarily consists of the Group's portfolio of retirement villages in Australia and New Zealand of £759m (HY 2023: £704m, FY 2023: £756m). At 30 June 2024 the properties 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.

 

10   Equity-accounted investments

 

The carrying amount of equity-accounted investments is £967m (HY 2023: £972m, FY 2023: £1,056m). All equity-accounted investments are included based on coterminous accounting periods.

 

The Group's principal equity-accounted investments are:

 

	Business activity	Share of issued capital	Principally operates in	Country of incorporation
Bupa Arabia for Cooperative Insurance Company (Bupa Arabia)	Insurance	43.25%	Saudi Arabia	Saudi Arabia
Highway to Health, Inc. (Highway to Health)	Insurance	49.00%	USA	USA

 

During the period, the Group received dividends of £55m (HY 2023: £49m, FY 2023: £49m) from Bupa Arabia.

 

On 8 January 2024, the Group acquired an additional 21.57% of the ordinary share capital of Niva Bupa for consideration of £263m, strengthening the Group's presence in the growing Indian health insurance sector. The additional shareholding acquired has resulted in Bupa holding a controlling interest in Niva Bupa of 62.98%, leading to the full consolidation of the company as a subsidiary. Immediately prior to the acquisition on 8 January 2024, the Group's existing stake in Niva Bupa was remeasured by £321m to a fair value of £417m, resulting in the Group recording a net £309m gain through other income and charges in the Condensed Consolidated Income Statement after the release of associated foreign exchange translation reserves. This is disclosed further in Note 20.

 

11   Post-employment benefits

 

The Group operates several funded and an unfunded defined benefit and defined contribution pension schemes for the benefit of employees.

 

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 any scheme assets. The discount rate used is the yield at the reporting date on high-quality corporate bonds denominated in the currency in which the benefit will be paid, and taking account of the maturities of the defined benefit obligations. When the calculation results in a benefit to the Group, the recognised asset is limited to the present value of any future refunds from the scheme or reductions in future contributions to the scheme.

 

Amount recognised in the Condensed Consolidated Income Statement

 

The total amount charged to the Condensed Consolidated Income Statement amounted to £nil (HY 2023: £2m; FY 2023: £2m).

 

Amount recognised directly in other comprehensive income

 

The amounts (credited)/charged directly to equity are:

 

	For six months ended 30 June 2024	For six months ended 30 June 2023	For year ended 31 December 2023
	£m	£m	£m
Actual return less expected return on assets	-	-	(1)
Loss arising from changes to financial assumptions	-	-	1
Loss arising from changes to experience assumptions	-	-	1
Gain arising from changes to demographic assumptions	-	-	(1)
Total remeasurement (credited)/charged directly to equity	-	-	-

 

Assets and liabilities of schemes

 

The assets and liabilities in respect of the defined benefit pension schemes are as follows:

 

	At 30 June 2024	At 31 December 2023	At 30 June 2023
	£m	£m	£m
Present value of funded obligations	(55)	(55)	(54)
Fair value of scheme assets	50	50	49
Net liabilities of funded schemes	(5)	(5)	(5)
Present value of unfunded obligations	(1)	(1)	(2)
Net recognised liabilities	(6)	(6)	(7)
Represented on the Condensed Consolidated Statement of Financial Position:
Net liabilities	(8)	(8)	(9)
Net assets	2	2	2
Net recognised liabilities	(6)	(6)	(7)

 

12   Restricted assets

 

	At 30 June 2024	At 31 December 2023	At 30 June 2023
	£m	£m	£m
Non-current restricted assets	34	33	41
Current restricted assets	95	89	85
Total restricted assets	129	122	126

 

Restricted assets are amounts held in respect of specific obligations and potential liabilities and may be used only to discharge those obligations and potential liabilities if and when they crystallise. The non-current restricted assets balance of £34m (HY 2023: £41m; FY 2023: £33m) consists of cash deposits held to secure a charge over certain unfunded pension scheme obligations (see Note 11). Included in current restricted assets is £92m (HY 2023: £82m; FY 2023: £85m) in respect of claims funds held on behalf of corporate customers.

 

13   Financial investments

 

The Group generates cash from its underwriting, trading and financing activities and invests the surplus cash in financial investments. These include government bonds, corporate bonds, pooled investment funds and deposits with credit institutions.

 

Recognition, measurement and 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 at initial recognition.

 

Financial investments are derecognised when the rights to receive cash flows 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, 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. For trade receivables, lifetime ECL is always applied. 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 (e.g. it is investment grade). The Group applies a 12-month ECL allowance to all assets other than trade receivables, as no significant increases in credit risk since initial recognition have been identified.

The measurement of ECL should reflect a probability-weighted outcome, the time value of money and the best available forward-looking information.

 

Financial investments are analysed as follows:

 

	At 30 June 2024		At 31 December 2023		At 30 June 2023
	Carrying value	Fair value	Carrying value	Fair value	Carrying value	Fair value
	£m	£m	£m	£m	£m	£m
Fair value through profit or loss
Corporate debt securities and secured loans	380	380	312	312	308	308
Government debt securities	28	28	34	34	40	40
Pooled investment funds	493	493	524	524	482	482
Deposits with credit institutions	30	30	25	25	29	29
Other loans	-	-	-	-	6	6
Equities	35	35	36	36	30	30
Fair value through other comprehensive income
Corporate debt securities and secured loans	381	381	17	17	33	33
Government debt securities	220	220	37	37	44	44
Amortised cost
Corporate debt securities and secured loans	1,335	1,337	1,056	1,061	1,234	1,232
Government debt securities	550	552	507	510	496	497
Deposits with credit institutions	1,241	1,243	1,090	1,095	1,305	1,305
Other loans	1	1	-	-	-	-
Total financial investments	4,694	4,700	3,638	3,651	4,007	4,006
Non-current	1,489	1,492	780	784	821	822
Current	3,205	3,208	2,858	2,867	3,186	3,184

 

Fair value of financial investments

 

An asset's fair value is the price at which an orderly transaction to sell or transfer the asset would take place between market participants at the measurement date under current market conditions (i.e. an exit price at the measurement date from the perspective of the market participant that holds the asset). The objective of a fair value measurement is to estimate this price.

 

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.

 

The fair values of financial investments are determined using different valuation inputs categorised into a three-level hierarchy. The different levels are defined by reference to the lowest level input that is significant to the fair value measurement, as follows:

•	Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
•	Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
•	Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

An analysis of financial investment fair values by hierarchy level is as follows:

 

	Level 1	Level 2	Level 3	Total
	£m	£m	£m	£m
At 30 June 2024
Fair value through profit or loss
Corporate debt securities and secured loans	21	359	-	380
Government debt securities	6	22	-	28
Pooled investment funds	64	405	24	493
Deposits with credit institutions	30	-	-	30
Equities	1	-	34	35
Fair value through other comprehensive income
Corporate debt securities and secured loans	16	365	-	381
Government debt securities	207	13	-	220
Amortised cost
Corporate debt securities and secured loans	416	921	-	1,337
Government debt securities	328	224	-	552
Deposits with credit institutions	-	1,243	-	1,243
Other loans	-	-	1	1
Total financial investments	1,089	3,552	59	4,700

 

	Level 1	Level 2	Level 3	Total
	£m	£m	£m	£m
At 31 December 2023
Fair value through profit or loss
Corporate debt securities and secured loans	18	293	1	312
Government debt securities	13	21	-	34
Pooled investment funds	93	407	24	524
Deposits with credit institutions	25	-	-	25
Equities	-	-	36	36
Fair value through other comprehensive income
Corporate debt securities and secured loans	17	-	-	17
Government debt securities	37	-	-	37
Amortised cost
Corporate debt securities and secured loans	443	618	-	1,061
Government debt securities	325	185	-	510
Deposits with credit institutions	-	1,095	-	1,095
Total financial investments	971	2,619	61	3,651

 

	Level 1	Level 2	Level 3	Total
	£m	£m	£m	£m
At 30 June 2023
Fair value through profit or loss
Corporate debt securities and secured loans	14	293	1	308
Government debt securities	22	18	-	40
Pooled investment funds	79	382	21	482
Deposits with credit institutions	29	-	-	29
Other loans	-	-	6	6
Equities	-	-	30	30
Fair value through other comprehensive income
Corporate debt securities and secured loans	33	-	-	33
Government debt securities	44	-	-	44
Amortised cost
Corporate debt securities and secured loans	469	763	-	1,232
Government debt securities	292	205	-	497
Deposits with credit institutions	-	1,305	-	1,305
Total financial investments	982	2,966	58	4,006

 

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 reassessed based on the lowest level input that is significant to the fair value measurement as a whole.

 

There were no transfers between fair value hierarchy levels in the period (HY 2023: £nil; FY 2023: £nil).

 

The Group currently holds Level 3 financial investments totalling £59m (HY 2023: £58m; FY 2023: £61m). The majority of Level 3 investments are unlisted equities and pooled investment funds valued at recent subscription values and conversion prices, which are considered to be unobservable inputs. Changes to the valuation assumptions which are reasonably possible could result in a change in fair value of plus or minus £3m (HY 2023: £3m; FY 2023: £3m).

 

The table below shows movement in the Level 3 assets measured at fair value:

	At 30 June 2024	At 31 December 2023	At 30 June 2023
	£m	£m	£m
Balance at beginning of period	61	63	63
Additions	2	1	-
Disposals	(1)	-	-
Net decrease in fair value¹	(1)	(1)	(2)
Foreign exchange	(2)	(2)	(3)
Balance at end of period	59	61	58

 

1.	All gains and losses are recognised in financial income and financial expense in the Condensed Consolidated Income Statement.

 

14   Insurance and reinsurance contracts

 

Insurance contracts are contracts under which the Group accepts significant insurance risk from a policyholder by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder.

 

Unit of account

A portfolio of insurance contracts is defined as insurance contracts subject to similar risks and managed together. The Group defines portfolios as insurance Business Units at a minimum, as the Group essentially sells one health insurance product line where cash flows are generally expected to respond similarly in direction and timing to changes in assumptions and as the Group manages the insurance business at geographical Business Unit level. There may be further disaggregation if there are business lines which are managed separately and have different risk profiles.

 

PAA eligibility

The Group applies the premium allocation approach (PAA) of the measurement for the majority of insurance contracts. The majority of the Group's contracts automatically qualify as the coverage period of each contract in the group is one year or less. As a result, the Group has taken the available policy choice to apply the PAA to these contracts. The Group also has a small number of policy groups with a coverage period of greater than a year. For these groups of contracts, the Group assesses whether the measurement of the LFRC under the PAA is expected to differ materially from that under the GMM. This requires the use of GMM and materiality thresholds determined by management for these policies, as well as the selection of reasonably expected scenarios against which eligibility is assessed. As a result of this assessment, these remaining contracts are also eligible to use the PAA measurement model with the exception of one legacy portfolio of individual health contracts in Brazil. This portfolio of contracts has a contract boundary of greater than one year where the contracts are onerous and a GMM valuation has been used.

 

Measurement

Liability for remaining coverage

On initial recognition of each group of insurance contracts, the carrying amount of the LFRC is based on the premiums received less any directly attributable acquisition costs not expensed as incurred. In subsequent periods, the LFRC is increased for any additional premiums received and release of any insurance acquisition cash flows and decreased for the recognition of insurance revenue that is released on a straight-line basis over the coverage period. The Group's default policy is not to adjust the LFRC to reflect the time value of money and the effect of financial risk, as the Group expects on initial recognition of each group of contracts that the time between providing each part of the services and the related premium due date is typically no more than one year. However, discounting may be applied in exceptional circumstances as described below.

 

Insurance acquisition cash flows

The Group's policy is to expense acquisition costs as they are incurred where the coverage period of each contract in the group is no more than one year. For the remaining contracts with a longer coverage period, insurance acquisition costs are allocated to the relevant group of insurance contracts and reduce the LFRC. The allocated acquisition costs are amortised consistently with the pattern of insurance revenue recognition.

 

Onerous contracts

If facts and circumstances indicate that a group of contracts is onerous, detailed testing is performed by comparing the carrying amount of the LFRC to the estimated fulfilment cash flows, which include an assessment of the risk adjustment using a confidence level approach. If the carrying amount of the LFRC is less than the estimated fulfilment cash flows, a loss component is recognised and an expense is recognised in the Condensed Consolidated Income Statement. Subsequently, the loss component is reassessed, with any movements being recognised in the Condensed Consolidated Income Statement.

 

Liability for incurred claims

The liability for incurred claims (LFIC) 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 liability includes an allowance for claims management and handling expenses.

 

The Group recognises the LFIC of a group of insurance contracts as the present value of the expected cash flows required to settle the obligation with an adjustment for non-financial risk. The Group does not adjust the future cash flows either for the time value of money or for the effect of financial risk for portfolios in which incurred claims are expected to be paid within one year of occurrence except in exceptional circumstances, as described below.

 

The LFIC 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. The ultimate liability may vary as a result of subsequent information and events. Adjustments to claims estimates for prior years are included in the Consolidated Income Statement in the financial year in which the change is made. The methods used and estimates made for the LFIC are reviewed regularly.

 

Risk adjustment

A risk adjustment reflects the compensation the Group requires for bearing the uncertainty about the amount and timing of the cash flows from non-financial risk as the Group fulfils insurance contracts. The Group has estimated the risk adjustment using a confidence level approach at the 85th percentile (HY 2023 and FY 2023: 85th percentile) and any movements in the risk adjustment are recognised in full within the insurance service result.

 

Insurance service expenses

Judgement is exercised in determining which expenses are directly attributable to insurance contracts, and therefore included within insurance service expenses. The Group classifies the majority of expenses incurred by insurance entities within insurance service expenses, except for those not directly attributable to insurance contracts.

 

Discounting

Discounting is optional for the LFRC carrying amount if the time between providing each part of the coverage and the related premium due date is one year or less and for the LFIC if claims are expected to be paid in one year or less from the date the claims are incurred. The Group does not apply discounting to the majority of policies. However, Bupa Acıbadem Sigorta has applied discounting to both the LFRC loss component and LFIC due to the high interest rate and high inflation environment in Türkiye. Bupa Global has also applied discounting to the LFIC for certain groups of insurance contracts as a proportion of claims are settled over a period that is greater than one year. In addition, the LFRC for the legacy individual health policies in Brazil has been discounted due to the long-term nature of these contracts.

 

Where discounting is applied, the Group policy is to use either the PRA published discount rates or European Insurance and Occupational Pensions Authority (EIOPA) specified discount rates. Discount rates are calculated based on a bottom-up approach.

 

Reinsurance contracts held

For reinsurance contracts held, Bupa applies the PAA for the majority of reinsurance contracts as the coverage period is one year or less. Bupa assesses the remaining contracts and applies the PAA as the resulting measurement would not differ materially from the result of applying the requirements in the GMM for reinsurance contracts held.

 

The Group measures the asset for remaining coverage (AFRC) on initial recognition of a group of reinsurance contracts held as the amount of ceded premiums paid. Subsequently the remaining coverage is increased for ceded premiums paid and decreased for amounts of ceded premiums recognised as reinsurance expenses for the services received in the period. The Group releases ceded reinsurance premiums on a passage of time basis over the coverage period. The Group does not adjust the AFRC for the time value of money or for the effect of financial risk as the time between providing the coverage and the related underlying premium is one year or less.

 

The carrying amount of a group of reinsurance contracts held also includes the asset for incurred claims (AFIC) comprising the fulfilment cash flows related to the past service allocated to the group. The Group does not adjust the AFIC for the time value of money or effect of financial risk as recoveries are expected to be paid within one year of occurrence.

 

The estimates for future cash flows of a group of reinsurance contracts held should allow for the risk of non-performance by reinsurers, which is the probability weighted expected value of the effect of reinsurance counterparty failure to fulfil the contractual obligations. Bupa's policy is to set the non-performance risk to zero as there are restrictions in place on the credit quality and amount of reinsurance ceded to individual counterparties and Bupa uses reinsurance only to a limited extent to mitigate insurance risks.

 

Investment components

The LFIC includes an insurance provision that is a non-distinct investment component for cash payments to Australian Health Insurance customers under a COVID-19 customer support programme. The provision was recognised at the point the Group formally announced the payment and insurance revenue recognised in the Condensed Consolidated Income Statement was reduced accordingly. The insurance provision is subsequently utilised on payment to the eligible customers. As at 30 June 2024, the LFIC includes an insurance provision of £46m (HY 2023: £175m; FY 2023: £46m) relating to these cash giveback payments.

 

The Group does not recognise any other material investment components or separate components from insurance contracts.

 

14.1   Insurance contracts roll forward

 

	Liability for remaining coverage		Liability for incurred claims		Total
For six months ended 30 June 2024	Excluding loss component £m¹	Loss component £m	Estimates of present value of future cash flows £m²	Risk adjustment £m	£m
Insurance contract liabilities at beginning of period	1,177	91	1,313	27	2,608
Insurance revenue	(5,937)	-	-	-	(5,937)
Insurance service expenses	23	(13)	5,733	5	5,748
Incurred claims and other expenses	-	-	5,842	12	5,854
Amortisation of insurance acquisition cash flows	23	-	-	-	23
Losses on onerous contracts and (reversals) of those losses	-	(13)	-	-	(13)
Changes to liabilities for incurred claims relating to past service	-	-	(109)	(7)	(116)
Insurance service result	(5,914)	(13)	5,733	5	(189)
Foreign exchange	(15)	(5)	(31)	(1)	(52)
Finance expense from insurance contracts issued	-	(10)	19	-	9
Total changes in statement of comprehensive income	(5,929)	(28)	5,721	4	(232)
Other movements¹,²	305	-	(74)	-	231
Non-distinct investment components	(11)	-	11	-	-
Cash flows
Premiums received	6,327	-	-	-	6,327
Claims and other expenses paid	-	-	(5,484)	-	(5,484)
Insurance acquisition cash flows	(62)	-	-	-	(62)
Total cash flows	6,265	-	(5,484)	-	781
Insurance contract liabilities at end of period	1,807	63	1,487	31	3,388

 

1.	Other movements include £301m of insurance contract liabilities recognised on the consolidation of Niva Bupa. See Note 20.
2.	Other movements include £74m of amortisation and depreciation expenses included within insurance service expense that are non-cash items that do not form part of the insurance contract liabilities balance.

 

	Liability for remaining coverage		Liability for incurred claims		Total
For year ended 31 December 2023	Excluding loss component £m	Loss component £m	Estimates of present value of future cash flows £m¹	Risk adjustment £m	£m
Insurance contract liabilities at beginning of year	1,081	100	1,176	21	2,378
Insurance revenue	(10,770)	-	-	-	(10,770)
Insurance service expenses	(6)	(27)	10,344	7	10,318
Incurred claims and other expenses	-	-	10,372	13	10,385
Amortisation of insurance acquisition cash flows	(6)	-	-	-	(6)
Losses on onerous contracts and (reversals) of those losses	-	(27)	-	-	(27)
Changes to liabilities for incurred claims relating to past service	-	-	(28)	(6)	(34)
Insurance service result	(10,776)	(27)	10,344	7	(452)
Foreign exchange	(41)	(1)	(61)	(1)	(104)
Finance expense from insurance contracts issued	-	19	6	-	25
Total changes in statement of comprehensive income	(10,817)	(9)	10,289	6	(531)
Other movements¹	(2)	-	(148)	-	(150)
Non-distinct investment components	(223)	-	223	-	-
Cash flows
Premiums received	11,152	-	-	-	11,152
Claims and other expenses paid	-	-	(10,227)	-	(10,227)
Insurance acquisition cash flows	(14)	-	-	-	(14)
Total cash flows	11,138	-	(10,227)	-	911
Insurance contract liabilities at end of year	1,177	91	1,313	27	2,608

 

1.	Other movements include £147m of amortisation and depreciation expenses included within insurance service expense that are non-cash items that do not form part of the insurance contract liabilities balance.

 

	Liability for remaining coverage		Liability for incurred claims		Total
For six months ended 30 June 2023	Excluding loss component £m	Loss component £m	Estimates of present value of future cash flows £m¹,²	Risk adjustment £m	£m
Insurance contract liabilities at beginning of period	1,081	100	1,176	21	2,378
Insurance revenue	(5,234)	-	-	-	(5,234)
Insurance service expenses	-	(26)	5,074	3	5,051
Incurred claims and other expenses¹	-	-	5,149	15	5,164
Amortisation of insurance acquisition cash flows	-	-	-	-	-
Losses on onerous contracts and (reversals) of those losses	-	(26)	-	-	(26)
Changes to liabilities for incurred claims relating to past service¹	-	-	(75)	(12)	(87)
Insurance service result	(5,234)	(26)	5,074	3	(183)
Foreign exchange	(36)	(3)	(59)	(1)	(99)
Finance expense from insurance contracts issued	-	6	2	-	8
Total changes in statement of comprehensive income	(5,270)	(23)	5,017	2	(274)
Other movements²	2	-	(66)	-	(64)
Non-distinct investment components	(175)	-	175	-	-
Cash flows
Premiums received	5,737	1	-	-	5,738
Claims and other expenses paid¹	-	-	(4,862)	-	(4,862)
Total cash flows	5,737	1	(4,862)	-	876
Insurance contract liabilities at end of period	1,375	78	1,440	23	2,916

 

1.	Incurred claims and other expenses and changes to liabilities for incurred claims relating to past service have been restated by £230m. Incurred claims and other expenses has been restated from £4,919m to £5,149m and changes to liabilities for claims incurred relating to past service from £155m to £(75)m.
2.	Other movements and claims and other expenses paid have been restated by £72m due to amortisation and depreciation expenses included within insurance service expense that are non-cash items do not form part of the insurance contract liabilities balance. Other movements has been restated from £6m to £(66)m and claims and other expenses paid from £(4,934)m to £(4,862)m.

 

Contracts measured on a GMM basis

 

Included within the loss component is £41m (HY 2023: £49m; FY 2023: £49m) related to the legacy portfolio of individual health contracts in Brazil, measured on a GMM basis. This portfolio is onerous as, due to regulatory restrictions on pricing, the insurance contracts continue to renew at premium rates that do not reflect the current cost of claims. During the period, the movement in the loss component driven by a change in the discount rate and the impact of the unwind of discounting applied to the fulfilment cash flows is a £12m income (HY 2023: £6m expense; FY 2023: £17m expense) and is recognised in net financial expense from insurance contracts issued in the Condensed Consolidated Income Statement.

 

As the portfolio is onerous, the contractual service margin is nil. A risk adjustment of £7m (HY 2023: £11m; FY 2023: £9m) is recognised to compensate the Group for the uncertainty about the amount and timing of cash flows from non-financial risk as the Group fulfils these contracts.

 

14.2   Reinsurance contracts roll forward

 

For six months ended 30 June 2024	Asset for remaining coverage £m	Amount recoverable on incurred claims £m	Total £m
Reinsurance contract assets at beginning of period	(16)	54	38
Allocation of reinsurance premiums	(135)	-	(135)
Amounts recoverable from reinsurers for incurred claims:
Amounts recoverable for incurred claims and other expenses	-	134	134
Changes to amounts recoverable for incurred claims relating to past service	-	-	-
Net expense from reinsurance contracts held	(135)	134	(1)
Foreign exchange	(1)	-	(1)
Other movements¹	46	-	46
Cash flows
Premiums paid	106	-	106
Recoveries from reinsurance	-	(78)	(78)
Total cash flows	106	(78)	28
Reinsurance contract assets at end of period	-	110	110

 

1.	Other movements include £46m of reinsurance contract assets recognised on the consolidation of Niva Bupa. See Note 20.

 

A risk adjustment is estimated on the amount recoverable on incurred claims using a confidence level approach at the 85th percentile (HY 2023 and FY 2023: 85th percentile). As this only totals £1m, this has not been separately presented.

 

For year ended 31 December 2023	Asset for remaining coverage £m	Amount recoverable on incurred claims £m	Total £m
Reinsurance contract assets at beginning of year	(18)	39	21
Allocation of reinsurance premiums	(148)	-	(148)
Amounts recoverable from reinsurers for incurred claims:
Amounts recoverable for incurred claims and other expenses	-	140	140
Changes to amounts recoverable for incurred claims relating to past service	-	1	1
Net expense from reinsurance contracts held	(148)	141	(7)
Foreign exchange	-	(1)	(1)
Cash flows
Premiums paid	150	-	150
Recoveries from reinsurance	-	(125)	(125)
Total cash flows	150	(125)	25
Reinsurance contract assets at end of year	(16)	54	38

 

For six months ended 30 June 2023	Asset for remaining coverage £m	Amount recoverable on incurred claims £m	Total £m
Reinsurance contract assets at beginning of period	(18)	39	21
Allocation of reinsurance premiums	(73)	-	(73)
Amounts recoverable from reinsurers for incurred claims:
Amounts recoverable for incurred claims and other expenses	-	53	53
Changes to amounts recoverable for incurred claims relating to past service	-	13	13
Net expense from reinsurance contracts held	(73)	66	(7)
Foreign exchange	-	(1)	(1)
Cash flows
Premiums paid	71	-	71
Recoveries from reinsurance	-	(54)	(54)
Total cash flows	71	(54)	17
Reinsurance contract assets at end of period	(20)	50	30

 

15   Assets and liabilities held for sale

 

	At 30 June 2024	At 31 December 2023	At 30 June 2023
	£m	£m	£m
Assets held for sale
Property, plant and equipment	9	41	22
Investment property	-	-	1
Financial investments	-	5	-
Inventories	-	-	1
Cash and cash equivalents	-	2	-
Total assets held for sale	9	48	24
Liabilities associated with assets held for sale
Lease liabilities	-	(2)	-
Provisions for liabilities and charges	-	(2)	-
Insurance contract liabilities	-	(4)	-
Trade and other payables	-	(1)	-
Total liabilities held for sale	-	(9)	-
Net assets held for sale	9	39	24

 

Net assets held for sale as at 30 June 2024 predominantly comprise a number of care homes within Bupa UK Care Services, and land, buildings and other care homes assets within Bupa Villages and Aged Care New Zealand and Australia.

 

An impairment loss of £nil (HY 2023: £2m; FY 2023: £8m) has been recognised within other income and charges (see Note 4) in the Condensed Consolidated Income Statement resulting from write-downs on the classification of assets as held for sale in the period.

 

Net assets held for sale as at 31 December 2023 predominantly comprised a number of care homes within Bupa UK Care Services and Bupa Villages and Aged Care New Zealand, an insurance business in ELA, as well as a number of dental practices within Bupa Dental Care UK. As at 30 June 2023, net assets held for sale comprised a number of care homes within Bupa UK Care Services, Bupa Villages and Aged Care Australia and Bupa Villages and Aged Care New Zealand, an office within Care Plus in Brazil, as well as a number of dental practices within Bupa Dental Care UK.

 

16   Cash and cash equivalents

 

	At 30 June 2024	At 31 December 2023	At 30 June 2023
	£m	£m	£m
Cash at bank and in hand	1,072	1,075	1,202
Short-term deposits	723	1,203	346
Total cash and cash equivalents	1,795	2,278	1,548

 

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 £2m (HY 2023: £3m; FY 2023: £1m) that are repayable on demand are reported within other interest-bearing liabilities (Note 17) in the Condensed Consolidated Statement of Financial Position. Demand deposits with restrictions on use set by a third party that fundamentally change their nature are reported within restricted assets (Note 12) in the Condensed Consolidated Statement of Financial Position. Both of these are considered components of cash and cash equivalents for the purpose of the Condensed Consolidated Statement of Cash Flows.

 

17   Borrowings

 

	At 30 June 2024	At 31 December 2023	At 30 June 2023  restated¹
	£m	£m	£m
Subordinated liabilities
Subordinated unguaranteed bonds	772	747	746
Total subordinated liabilities	772	747	746
Other interest-bearing liabilities
Senior unsecured bonds	735	1,035	599
Fair value adjustment in respect of hedged interest rate risk	(25)	(22)	(63)
Bank loans and overdrafts	180	48	415
Other debt	34	29	-
Total other interest-bearing liabilities	924	1,090	951
Total borrowings	1,696	1,837	1,697
Non-current¹	1,619	1,489	1,365
Current¹	77	348	332

 

1.	Non-current and current amounts have been restated for amendments to IAS 1. See Note 1.4(b)

 

Subordinated unguaranteed bonds

 

On 8 January 2024, the Group acquired an additional 21.57% of the ordinary share capital of Niva Bupa. This has resulted in Bupa holding a controlling interest in Bupa Niva of 62.98%, leading to the full consolidation of Niva Bupa as a subsidiary. Niva Bupa holds two subordinated debt instruments issued on 15 November 2021 and 15 March 2022 of INR1,500m and INR1,000m, which have a carrying value of £24m at 30 June 2024. These are due to mature on 15 November 2031 and 15 March 2032. Interest is payable on the bonds at 10.70% per annum. The total fair value of these bonds, including accrued interest, is £24m.

 

Senior unsecured bonds

 

On 5 April 2024, the Company redeemed the maturing £300m of senior unsecured bonds, issued in April 2017.

 

On 12 October 2023, the Company issued €500m of senior unsecured bonds, guaranteed by the Parent, which mature on 12 October 2030. The bonds bear interest on their outstanding principal amount at a fixed rate of 5.00% per annum. The total hedged fair value of these bonds, including accrued interest, capitalised issue costs and discounts, is £447m. The change in value arising from interest rate risk is matched, subject to any hedge ineffectiveness, by the fair value of swap contracts in place to hedge this risk.

 

Bank loans and overdrafts

 

The Group maintains a £900m revolving credit facility in the name of the Company, which matures in December 2028. The facility was drawn down by £150m as at 30 June 2024 (HY 2023: £380m; FY 2023: £nil). Bank loans and overdrafts bear interest at commercial rates linked to SONIA for sterling or equivalent for other currencies.

 

Fair value of financial liabilities

 

The fair value of a financial liability is defined as the amount for which the liability could be exchanged in an arm's-length transaction between informed and willing parties. Fair values of subordinated liabilities and senior unsecured bonds are calculated based on quoted prices. The fair values of quoted liabilities in active markets are based on current offer prices. The fair values of financial liabilities for which there is no active market are established using valuation techniques. These may include reference to the current fair value of other instruments that are substantially the same and discounted cash flow analysis.

 

Financial liabilities are categorised into a three-level hierarchy. A description of the different levels is detailed in Note 13. Where the fair value of a bond cannot be otherwise determined from quoted market values, the instrument is discounted using similar duration treasuries and applying an instrument-specific spread.

 

An analysis of borrowings by fair value classification is as follows:

 

	Level 1	Level 2	Level 3	Total
At 30 June 2024	£m	£m	£m	£m
Subordinated liabilities	633	24	-	657
Senior unsecured bonds	689	-	-	689
Other debt	-	-	34	34
Bank loans and overdrafts	-	179	-	179
Total fair value	1,322	203	34	1,559

 

	Level 1	Level 2	Level 3	Total
At 31 December 2023	£m	£m	£m	£m
Subordinated liabilities	678	-	-	678
Senior unsecured bonds	1,033	-	-	1,033
Other debt	-	-	29	29
Bank loans and overdrafts	-	48	-	48
Total fair value	1,711	48	29	1,788

 

	Level 1	Level 2	Level 3	Total
At 30 June 2023	£m	£m	£m	£m
Subordinated liabilities	632	-	-	632
Senior unsecured bonds	540	-	-	540
Bank loans and overdrafts	-	415	-	415
Total fair value	1,172	415	-	1,587

 

The Group does not have any material Level 3 financial liabilities except for other debt, which includes a loan from George Health Enterprises Pty Ltd.

 

18   Provisions for liabilities and charges

 

	At 30 June 2024	At 31 December 2023	At 30 June 2023
	£m	£m	£m
Long service and annual leave	109	101	95
Customer remediation and legal provisions	13	15	16
Provision for underpayment of employee entitlements	22	23	19
Property restoration provision	29	27	30
NHS dental contract clawback provision	41	56	70
Contract provisions	60	57	36
Chile payment plan provision	215	-	-
Other	56	56	28
Total provisions for liabilities and charges	545	335	294

 

Other provisions include regulatory provision relating to settlements, penalties and levies payable to the Group's various regulators and other smaller provisions, along with contingent consideration related to earn-out payable on acquisitions of dental practices in Poland.

 

At 30 June 2024 a provision of £215m has been recognised in relation to Isapre Cruz Blanca in Chile and the retrospective liability relating to statutory Risk Factor Tables. This matter was disclosed as a contingent liability at 31 December 2023 as due to the wide range of possible outcomes and regulatory uncertainty, it was not possible to reliably estimate the value of the future payments. However, in May 2024 legislation came into force that gave clarity over the quantum and steps required for implementation of the retrospective liability relating to statutory Risk Factor Tables (used to adjust the price of insurance contracts based on risk factors such as age). The local regulator Superintendent of Health (SIS) issued additional guidance on 7 June 2024 which set out details of the next steps the Isapres are required to take.

 

As a result of the clarity the legislation provides, the Group is now able to arrive at a reliable estimate and has recognised a provision in accordance with a payment plan which has been submitted to the SIS for approval. SIS review of the plan is still underway and as such some uncertainty remains until the approval of the plan, which is likely to be concluded by 31 December 2024. The liability is expected to be settled over 13 years in accordance with the legislation and the provision has been discounted over this period using a Chilean risk-free rate.

 

19   Restricted Tier 1 (RT1) notes

 

On 24 September 2021, Bupa Finance plc issued £300m of RT1 notes with a fixed coupon of 4.000% paid semi-annually in arrears. Transaction costs of £3m were recognised in respect of the issue. The total coupon paid during the period was £6m (HY 2023: £6m; FY 2023: £12m).

 

The RT1 notes are perpetual with no fixed maturity or redemption date. The notes have a first call date of 24 March 2032 and interest is payable at the sole and absolute discretion of Bupa Finance plc, with cancelled interest providing no rights to the holder of the notes nor being considered a default. The RT1 notes are therefore treated as equity. The notes are convertible to share capital of Bupa Finance plc on the occurrence of certain trigger events.

 

20   Business combinations and disposals

 

(a) 2024 acquisitions

 

A number of acquisitions were made in the period ended 30 June 2024, the most significant being the increase in the Group's investment in Niva Bupa Health Insurance Company Limited ("Niva Bupa"), an Indian health insurer.

 

The following assets and liabilities have been recognised at fair value based on the Group's initial assessment of the acquisitions. The acquisition balance sheets of all acquisitions are expected to be finalised during 2024:

 

		Niva Bupa	Other
		Fair value £m	Fair value £m
Intangible assets		41	2
Property, plant and equipment		10	8
Deferred taxation assets		7	-
Financial investments		477	-
Reinsurance contract assets		46	-
Trade and other receivables		2	6
Cash and cash equivalents		44	1
Subordinated liabilities		(24)	-
Lease liabilities		(8)	(1)
Deferred taxation liabilities		(11)	-
Provisions for liabilities and charges		(2)	-
Insurance contract liabilities		(301)	-
Trade and other payables		(50)	(4)
Non-controlling interests share of net assets		(87)	-
Bupa's share of consolidated net assets		144	12
Bupa's share of consolidated net assets		144	12
Goodwill¹		536	22
Existing investment in associate		(96)	-
Fair value adjustment to investment in associate		(321)	-
Consideration¹		263	34
Consideration satisfied by:
Cash		263	34
Total consideration paid		263	34
Purchase consideration settled in cash		263	34
Cash acquired on acquisition		(44)	(1)
Net cash outflow on acquisition of controlling interest		219	33

 

1.	Includes adjustment to goodwill and consideration in respect of the prior year acquisitions.

 

Niva Bupa

On 8 January 2024, the Group acquired an additional 21.57% of the ordinary share capital of Niva Bupa for consideration of £263m, strengthening the Group's presence in the growing Indian health insurance sector. The additional shareholding acquired has resulted in Bupa holding a controlling interest in Niva Bupa of 62.98%, leading to the full consolidation of the company as a subsidiary. Immediately prior to the acquisition on 8 January 2024, the Group's existing stake in Niva Bupa was remeasured by £321m to a fair value of £417m, resulting in the Group recording a net £309m gain through other income and charges in the Condensed Consolidated Income Statement after the release of associated foreign exchange translation reserves. Non-controlling interests of £87m have been recognised on acquisition based on a proportionate share of identifiable net assets. Transaction costs of £3m have been recognised within other operating expenses.

 

The purchase price allocation exercise for Niva Bupa is largely complete and along with the fair value adjustments is expected to be finalised by 31 December 2024. The Group has identified intangible assets of £41m, representing customer relationships (£38m) and software (£3m) with useful lives of 12 and 3 years respectively. Goodwill of £536m has been recognised, arising on the write-up of the previously held investment to fair value (£321m) and the increase in shareholding (£215m). Goodwill is not deductible for tax purposes, and represents the future profit growth that is expected to be achieved through accessing the growing Indian health insurance sector. In future periods, goodwill will be assessed for impairment in line with the accounting policies as detailed in Note 7 based on the appropriate valuation methodology in the business. As an investment in a business in a high growth economy the valuation is sensitive to macro-economic factors, and the growth trajectory of the business. The most material sensitivity is to macro-economic factors where a 1% increase or decrease in discount rate could impact Bupa's share of the business valuation by plus or minus £157m.

 

The Group has recognised £220m of revenue, and £54m of loss before taxation in respect of Niva Bupa in the Condensed Consolidated Income Statement for the period ending 30 June 2024 since acquisition on 8 January 2024. The loss arises from new business and renewals written in the period where insurance acquisition costs on contracts which have a coverage period of one year or less are expensed as incurred. Profit on business incepted pre-acquisition that would normally be earned during 2024 is recognised as a fair value adjustment on acquisition by the Group, together with some changes to align accounting policy choices to those of the Group.

 

As part of this transaction, put options have been issued to non-controlling interest parties whereby the Group can be required to acquire additional shares from non-controlling interest parties of Niva Bupa between 1 January 2027 and 30 June 2030, at fair market value, if a successful IPO of Niva Bupa has not been completed. The Group has therefore recognised a share purchase liability of £105m on initial recognition directly against equity reserves, being the Group's estimate of the discounted amount required to settle the liability based on the acquisition valuation. Subsequent remeasurements of the put option due to changes in fair value will be recognised in the Condensed Consolidated Income Statement, with any future derecognition being recognised directly between the share purchase liability and equity.

 

Other

In June 2024, the Group acquired 70% of Clínica Dermatológica Centroderm 2001, S.L. and Advanced Skin Care, S.L, two companies operating dermatology clinics business in Spain, for consideration of £12m. Net assets of £1m and resulting goodwill of £11m were recognised on acquisition.

 

As part of this transaction, a put option and call option have been issued to non-controlling interest parties and the Group respectively, whereby the Group can be required to acquire up to 30% of the non-controlling interest parties shareholdings of the two companies between 31 May 2029 and 30 August 2029, at fair market value, subject to the exercise of the options. The Group has therefore recognised a share purchase liability of £6m on initial recognition directly against equity reserves, being the Group's estimate of the discounted amount required to settle the liability. Subsequent remeasurements of the put option due to changes in fair value will be recognised in the Condensed Consolidated Income Statement.

 

Acquisitions with a total consideration of £12m were made in Poland over the course of the period as the Group continued to expand into new market segments. These included the acquisitions of Ortopedicum Sp. z.o.o., a private hospital for consideration of £8m, Centrum Medyczne OMEGA Sp. z.o.o., a private outpatient care provider for consideration of £2m and Smart Smile Sp. z.o.o., a dental clinic for consideration of £2m. Net assets of £7m were recognised in respect of the acquisitions along with associated goodwill of £5m.

 

In addition, the Group acquired Blackberry Clinic Group Ltd, Blackberry Clinic Ltd, Blackberry Gymnasium Ltd and Blackberry Clinic (Ipswich) Ltd in the UK, for consideration of £6m. Net assets of £1m and resulting goodwill of £5m were recognised on acquisition. The Group also acquired CompuGroup Medical Information Systems, Inc., a healthcare software company for consideration of £4m. Net assets of £3m and resulting goodwill of £1m were recognised on acquisition.

 

Other minor acquisitions in the period included seven dental clinics in Spain for consideration of £1m with associated goodwill of £1m and a health centre in Australia.

 

There was an adjustment to goodwill and consideration in respect of the prior year acquisitions in Brazil. Both goodwill acquired and consideration decreased by £1m.

 

Included in the Condensed Consolidated Income Statement is revenue of £5m and profit before taxation of £1m in relation to those businesses acquired in the period.

 

If the acquisition date of Niva Bupa and the other businesses acquired during the period had been 1 January 2024, the Group would have reported revenue of £8,296m and profit before taxation of £510m for the period ended 30 June 2024.

 

(b) 2024 disposals

 

During the period, the Group completed the sale of 6 care homes in Bupa Villages and Aged Care New Zealand for consideration of £18m and the sale of 2 care homes within Bupa UK Care Services for consideration of £4m. In addition, the Group completed the sale of 32 dental clinics in the UK for consideration of £6m, resulting in a net loss on disposal of £5m. The Group also completed the sale of 6 dental clinics in Australia for consideration of £2m, resulting in a net loss on disposal of £5m.

 

Other minor disposals in the period included the sale of Bupa Insurance (Bolivia) S.A for consideration of £3m.

 

(c) 2023 acquisitions

 

During 2023, the Group made acquisitions for total consideration of £63m, recognising net assets on acquisition of £26m.

 

In June 2023, the Group acquired the insurance and medical business of Asefa, S.A. Seguros y Reaseguros, an insurance company specialising in the construction industry that operates in Spain, for consideration of £32m. Intangible assets consisting of customer relationships and computer software totalling £18m, other net liabilities of £(1)m and resulting goodwill of £15m were recognised on acquisition.

 

Acquisitions with a total consideration of £13m were made in Poland over the course of the year as the Group continued to grow and enter into new market segments. These included the acquisitions of Orthos, Stomatologia Makara and 4Dent for consideration of £13m. Intangible assets consisting of brands/trademarks of £1m and other net assets of £4m were recognised in respect of the acquisitions along with associated goodwill of £8m.

 

Acquisitions with a total consideration of £15m were made in Brazil as part of a strategic plan to acquire new businesses in the region. These included the acquisitions of Instituto de Previdência e Assistencia Odontologia Ltda and Vacinar Centro De Imunizacao Ltda for consideration of £8m and £7m respectively. Intangible assets consisting of customer relationships of £3m were recognised in respect of the acquisitions along with associated goodwill of £12m.

 

In addition, in December 2023, the Group acquired Smart Clinics Limited, a private members healthcare company operating in the UK, for consideration of £4m; other net assets of £1m and resulting goodwill of £3m were recognised on acquisition.

 

There was an adjustment to goodwill and consideration in respect of the 2022 acquisitions in Poland. Both goodwill acquired and consideration decreased by £1m.

 

Included in the Consolidated Income Statement for the year ended 31 December 2023 is revenue of £18m and profit before taxation of £1m in relation to those businesses acquired in the year.

 

If the acquisition date of the businesses acquired during the year had been 1 January 2023, the Group would have reported revenue of £15,142m and profit before taxation of £720m for the year ended 31 December 2023.

 

(d) 2023 disposals

 

During 2023, the Group made disposals for a total consideration of £31m, recognising net loss on disposals of £1m.

 

The Group completed the sale of 4 care homes and a retirement village in Bupa Villages and Aged Care New Zealand for consideration of £11m and the sale of 3 care homes within Bupa UK Care Services for consideration of £14m, resulting in a net gain on disposal of £3m.

 

In addition, the Group completed the sale of 12 dental clinics in the UK for consideration of £4m, resulting in a net gain on disposal of £3m. Other minor disposals in the period included 5 dental clinics in Australia.

 

The Group liquidated Amedex insurance company resulting in a net gain on disposal of £2m and liquidated Sonorad company in Integramedica business resulting in a net loss on disposal of £8m. Other minor liquidations in the period included the closure of 2 clinics in China.

 

21   Commitments and contingencies

 

Capital commitments

 

Capital expenditure for the Group contracted at 30 June 2024 but for which no provision has been made in the Condensed Consolidated Financial Statements amounted to £28m (HY 2023: £32m; FY 2023: £42m). Of this, £25m (HY 2023: £31m; FY 2023: £38m) predominantly relates to aged care facility and retirement village project commitments in Australia and New Zealand and hospital projects in the UK; specifically £10m (HY 2023: £23m; FY 2023: £13m) in relation to property, plant and equipment and £15m (HY 2023: £8m; FY 2023: £25m) in relation to investment property. £3m (HY 2023: £1m, FY 2023: £4m) relates to computer software projects commitments in Australia of £2m and in the UK of £1m.

 

Contingent assets

 

The Group currently has no contingent assets.

 

Contingent liabilities

 

The Group has contingent liabilities arising in the ordinary course of business. These include losses which might arise from litigation, consumer matters, other disputes, regulatory compliance (including data protection) and interpretation of law (including employment law and tax law). It is not considered that the ultimate outcome of any contingent liabilities could have a significant adverse impact on the financial condition of the Group.

 

Bupa Finance plc

Statement of Directors' responsibilities for the six months ended 30 June 2024

 

We confirm that to the best of our knowledge:

•	The condensed set of financial statements have been prepared in accordance with UK-adopted International Accounting Standard 34 Interim Financial Reporting and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
•	The interim management report includes a fair review of the information voluntarily provided in accordance with the requirements of:

(a)   DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the financial year.

(b)   DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

The Directors of Bupa Finance plc are listed in the 2023 Annual Report and there have been no changes to the date of this statement.

 

By order of the Board

 

James Lenton                                                                                        Clare Binmore

Director                                                                                                  Director

31 July 2024

 

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 2024 (the "period").

 

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority as if the company were required to comply with these rules.

 

The interim financial statements comprise:

•       the Condensed Consolidated Statement of Financial Position as at 30 June 2024;

•       the Condensed Consolidated Income Statement for the period then ended;

•       the Condensed Consolidated Statement of Comprehensive Income for the period then ended;

•       the Condensed Consolidated Statement of Cash Flows for the period then ended;

•       the Condensed Consolidated Statement of Changes in Equity for the period then ended; and

•       the explanatory notes to the interim financial statements.

 

The interim financial statements included in the Condensed Consolidated Half Year Financial Statements of Bupa Finance plc have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority as if the company were required to comply with these rules.

 

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

 

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

We have read the other information contained in the Condensed Consolidated Half Year Financial Statements and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

 

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed. This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410. However, future events or conditions may cause the group to cease to continue as a going concern.

 

Responsibilities for the interim financial statements and the review

 

Our responsibilities and those of the directors

The Condensed Consolidated Half Year Financial Statements, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the Condensed Consolidated Half Year Financial Statements in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority as if the company were required to comply with these rules. In preparing the Condensed Consolidated Half Year Financial Statements, including the interim financial statements, the directors are responsible for assessing the group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.

 

Our responsibility is to express a conclusion on the interim financial statements in the Condensed Consolidated Half Year Financial Statements based on our review. Our conclusion, including our Conclusions relating to going concern, is based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion paragraph of this report. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority as if the company were required to comply with these rules and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

 

PricewaterhouseCoopers LLP

Chartered Accountants

London

31 July 2024