BUPA FINANCE PLC
(Company number 2779134)
Directors' report and financial statements
for the financial year ended 31 December 2022
Contents
Page
Directors and officers
2
Strategic Report
3
Governance Report
26
Independent auditors’ report to the members of Bupa Finance plc
44
Consolidated Financial Statements
56
Notes to the Consolidated Financial Statements
62
Bupa Finance plc Company Accounts
126
Five-year Financial Summary
151
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', '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 about 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 Finance plc
Registered number: 2779134
Directors and Officers
Directors
S K Dolan (retired 1 September 2022)
J A Lenton
G M Evans
G H Roberts (retired 1 September 2022)
C Binmore (appointed 25 October 2022)
S M Fielding (appointed 25 October 2022)
Company Secretary
C R Campbell
Registered Office
Auditors
PricewaterhouseCoopers LLP
Bupa Finance plc
Registered number: 2779134
2
Strategic Report
The Directors present their Strategic Report for the year ended 31 December 2022 for Bupa Finance plc (the ‘Company’) and
its subsidiary companies (together, the ‘Group’). 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’).
Principal activities
The Company is a part of the Bupa Group, which is an international healthcare group. The principal activity of the Company is
the provision of financing and treasury management of Bupa’s businesses, which are managed in three Market Units; Asia
Pacific, Europe and Latin America and Bupa Global and UK.
About Bupa
Bupa's purpose is helping people live longer, healthier, happier lives and making a better world. We are an international
healthcare company serving over 43 million customers worldwide. With no shareholders, Bupa Group reinvests profits into
providing more and better healthcare for the benefit of current and future customers.
We directly employ around 82,000
3
people, principally in the UK, Australia, Spain, Chile, Poland, New Zealand, Hong Kong
SAR, Türkiye, Brazil, Mexico, the US, Middle East and Ireland. We also have associate businesses in Saudi Arabia and India.
Business model
Our businesses
What we do
Health insurance
•
71% of revenue
•
24.4m Insurance customers worldwide
•
Our main business is health insurance for corporate customers,
small and medium-sized enterprises (SMEs) and for individual
customers.
•
We have a strong domestic health insurance presence via our
businesses in the UK, Australia, Spain, Chile, Hong Kong SAR,
Türkiye, Brazil and Mexico and our associate businesses in
Saudi Arabia and India.
•
We offer international private medical insurance (IPMI) through
our Bupa Global businesses, for customers wanting access to
quality healthcare, wherever and whenever they need it.
•
We provide dental insurance in Australia, the UK, Spain, Chile,
Poland, Hong Kong, Brazil and through Bupa Global.
Health Provision
•
21% of revenue
•
376 health clinics
•
19.2m provision customers worldwide
•
979 dental centres
•
Health clinics: Services include health assessments, GP
services, and physiotherapy. We also have outpatient and
speciality clinics.
•
Digital provision: We offer digital provision services including
digital GP services, care triage and consultation, mental health
coaching and support, and chronic care management.
•
Hospitals: We run hospitals in Spain, Chile, Poland, the UK and
Mexico.
•
Dental: A network of centres across many countries.
Aged care
•
8% of revenue
•
20,200 residents in our care homes
•
Our aged care portfolio comprises care homes, retirement
villages, day centres and homecare.
•
Aged care services in Australia, New Zealand, the UK and Spain.
Financial Headlines
•
Revenue
1
of £14.0bn was up 7% (2021: £13.1bn) at constant exchange rates (CER) with year-on-year growth in all
our lines of business.
•
Underlying profit
2
before taxation of £693m, was up 37% at CER (2021: £506m) as a result of strong customer
demand and included a number of one-off exceptional trading items in our Market Units, which are broadly neutral at
a Group level.
•
There were asset impairments across goodwill, other intangibles and tangible assets during the second half of the
year totalling £1bn. The material Business Unit impairments were UK Dental (£646m), Bupa Chile (£161m), BVAC
Australia (£103m) and UK Care Services (£90m). These were the result of macroeconomic, and in some cases,
sectoral and operational factors which are further detailed below.
Strategic Report
For the year ended 31 December 2022
3
1
Revenues from associate businesses are excluded from reported figures. Customer numbers and economic share of post-tax profits from our associate businesses are
included.
2
Underlying profit is a non-GAAP financial measure. This means it is not comparable to other companies. Underlying profit reflects our trading performance and excludes
a number of items included in statutory profit before taxation, to facilitate year-on-year comparison. These items include impairment of intangible assets and goodwill
arising on business combinations, as well as market movements such as gains or losses on foreign exchange, on return-seeking assets, on property revaluations and
other material items not considered part of trading performance. A reconciliation to statutory profit before taxation can be found in the notes to the consolidated financial
statements.
3
Based on average number of employees during the year.
.
•
Statutory loss before taxation of £306m is a decline from a profit of £537m in 2021 (a 157% decline at actual
exchange rates (AER).
•
Continued implementation of our new 3x6 strategy drove strong customer volume growth, with one million more
health insurance customers worldwide. In health provision, we grew by two million customers. Together with pricing
action, these dynamics driven by customer demand offset global inflationary headwinds.
Business context
•
These results reflect continuing good organic growth across many of our insurance businesses and increased activity
in health provision businesses to meet increasing customer demand.
•
These results were offset by: ongoing challenges in workforce availability across several markets, particularly in UK
Dental. The impacts of COVID-19 have subsided in most of our markets but persisted in parts of our Asia Pacific
Market Unit.
•
During 2022, global inflation rose sharply resulting in higher central bank interest rates, leading to increased cost of
capital which reduces the valuation of business units for impairment testing.
Financial position
•
Solvency II capital coverage ratio
3
remains strong at 181% (2021: 179%).
•
Leverage
4
is 27.0% (2021: 27.9%) including IFRS 16 lease liabilities. Excluding these liabilities, the leverage ratio is
19.1% (2021: 20.4%).
•
Net cash generated from operating activities was £1,039m, up £88m on prior year
5
primarily due to strong trading
performance.
Note on Chile
•
As referenced at the Half Year 2022, the Isapre insurance industry in Chile has been negatively impacted by judicial
and regulatory action
6
.
•
The Chilean Supreme Court has significantly shifted its interpretation to Isapre pricing in recent years, with the
cumulative effect of restricting the previously permitted, and generally accepted, pricing/rate-setting approach. In
December 2022, the Supreme Court issued a ruling which requires Isapres to use a statutory risk factor table with
retrospective effect – meaning product coverage is not matched by the ability to increase rates to reflect the cost of
such coverage. This ruling is complex and uncertain, and the relevant regulator has until May 2023 to implement it.
BUPA GROUP CEO's UPDATE
These results demonstrate positive underlying performance across Bupa Group in a challenging economic environment. We are
making good progress implementing the new 3x6 strategy and our focus on driving significant transformation around
digitalisation and customer service improvements has led to good organic customer growth in several businesses. As well as
being the first full year of implementation of the new strategy, 2022 was also a significant year for Bupa as we celebrated our
75th anniversary.
The increase in both our revenue and underlying profit as a result of strong customer demand demonstrates this progress, with
strong insurance customer volume growth.
The large statutory loss arising from goodwill impairments is disappointing, however, and reflects different factors. Global
inflation has risen sharply driven by the aftermath of the pandemic and the invasion of Ukraine. Global markets responded by
increasing central bank rates leading to increasing and more volatile bond yields causing interest rates to rise sharply during the
second half of 2022. This led to significant increases in the cost of capital of our businesses, impacting the carrying value. In
addition to this macro-economic impact:
•
In UK Dental, operational challenges increased further during the second half of the year, in particular below target
recruitment and retention of clinicians and increasing wage and energy costs, resulting in lower projected cash flows.
A strategic review was initiated and new leadership was put in place.
•
In Chile, the Isapre industry has been negatively impacted by judicialisation of premium pricing and regulatory action
leading us to reassess our expectations of future cash flow from our Isapre business.
•
In Australian aged care, we have reassessed our expectations of future cash flows to make an allowance for
implementing the expected impact of mandatory care minutes for residents and future reform of government
residential aged care funding.
The Group's underlying performance, together with the quality of growth we are achieving across multiple businesses, gives us
confidence for the future. Our portfolio management approach is delivering results, particularly in recovering performance in
Bupa Global.
Strategic Report
For the year ended 31 December 2022
4
3
The 2022 Solvency II capital coverage ratio is an estimate and unaudited.
4
Leverage is calculated based on gross debt (excluding RT1) divided by gross debt plus equity.
5
2021 has been restated for the implementation of the IFRS Interpretations Committee agenda decision on Demand Deposits with Restrictions on Use arising from a
contract with a Third Party. See Note 1.5a for further detail.
6
Isapres are part of Chile's social security system and provide access to health insurance for individuals, among other things. Pricing for Isapre contracts is determined by
reference to a base price, a risk factor table (which adjusts for age) and a “GES” price (a flat rate covering a list of diseases).
We are pleased with the continued strong growth across health insurance in multiple countries, including Australia, Spain, UK,
Poland, Brazil and Türkiye. We believe this demonstrates how our customers continue to see the value of our services, even in
a cost-constrained environment. We are also working hard to meet customers' changing expectations of healthcare and we
continued to make significant progress in our digital transformation journey with further implementation of our digital platform,
Blua, across different markets.
Rising demand for healthcare and post-pandemic recovery are also reflected in the growth across our health provision
businesses, as we served two million more customers than in 2021. In aged care, occupancy improved in Spain and the UK,
while occupancy was down in Australia and New Zealand as these businesses continued to navigate challenges from
COVID-19 impacts and workforce availability.
It is a challenging time for our employees due to the increased cost of living. We are focused on helping our customer-facing
colleagues, in particular, and have provided support which has varied according to local markets. We’ve also just announced a
broader package of health and wellbeing initiatives, Viva, to help our people worldwide and this will be rolled out across Bupa
this year.
Our thoughts are with everyone impacted by the tragic recent earthquakes in Türkiye and Syria. As the recovery efforts
continue, our team in Türkiye has been working hard on a support package for those in need, including customers and
colleagues. Through our business in Poland, we have been providing free healthcare support to Ukrainian refugees who have
been forced to flee the war over the past year. We’re clear that we will continue to fund this support for as long as needed.
Strategic progress
Bupa’s 3x6 strategy is structured around three ambition KPIs focused on digitalisation and customer experience and six
strategic and enabling pillars. Over 2022, we made good progress, including:
•
Customer: We’ve received over three million responses from our Net Promoter Score surveys. Through listening to
this feedback, we have delivered over 6,000 customer experience improvements.
•
Growth: We are focused on driving strong and sustainable growth in our market share across our funding businesses
and we delivered 8% growth in insurance customers (16% when including our associate businesses).
•
Transformation: We continued to develop Blua, our digital health solution. This app, which gives access to virtual
health appointments and preventative health coaching and has now expanded to 10 countries, including the UK.
•
Sustainability: We launched our new sustainability strategy. Eco-Disruptive, our global talent and innovation
programme through which we work with eco-start-ups, ran for the second successful year and is helping us to
discover and develop more sustainable solutions to how we deliver healthcare.
•
Agile Culture: Through our internal app, our leaders have listened to 53,000 customer feedback calls and submitted
over 15,000 customer improvement ideas.
•
Data: Over 3,000 colleagues took part in our Data SummIT as part of our ongoing programme to build digital skills
and literacy.
New Sustainability strategy
It’s becoming clearer that we can’t look after people’s health if we don’t also help to address the health of our planet – this is
now part of Bupa’s purpose. To address this, we finalised a new sustainability strategy. It aims to deliver health benefits for
people and the planet with innovative solutions to the sustainability challenges we face. The strategy has three key pillars:
•
Mission Zero: Doing less harm by minimising our impact on the environment.
•
Mission Accelerate: Working to accelerate climate and health action and playing our part in transforming the wider
sector.
•
Mission Regenerate: Going beyond doing less harm to doing more good.
Outlook
We are seeing continued strong demand for our products and services to meet changing customer needs, particularly digital
access to healthcare. Through our 3x6 strategy, we are focused on expanding the availability of these services across all of our
markets. We are encouraged by the positive overall performance across the Group and how our businesses are transforming
while continuing to deliver for our customers.
High inflation continues to increase costs for our businesses and for our customers, although we are encouraged by the
customer growth we have seen. The recruitment and retention of healthcare workers remains an ongoing sector-wide challenge
in multiple markets – impacting our health provision businesses, notably UK dental and some aged care businesses. In Chile,
as noted on page 4 ongoing judicial and regulatory uncertainty continues to affect the Isapre industry creating a challenging
operating environment for our Isapre business.
We are confident in the future and see positive momentum behind the implementation of our strategy. There is much to do but
we are well-positioned to meet rising demand for healthcare services across all our markets.
Strategic Report
For the year ended 31 December 2022
5
MARKET UNIT PERFORMANCE
Asia Pacific
Revenue
Underlying profit
2022*
£5,638m
£331m
2021 (AER)
£5,498m
£249m
% growth
3%
33%
2021 (CER)
£5,692m
£256m
% (decline)/growth
(1%)
29%
*Underlying profit includes £66m of undistributed health insurance claims savings related to COVID-19. This is intended to be returned to
Australian health insurance customers in line with our commitment to not benefit from COVID-19. Future health insurance underlying profit will be
impacted by the cost of any amounts returned to customers at the point such a return is announced.
Health insurance
customers (m)
Healthcare provision
customers (m)
Aged care residents
2022
4.5
2.7
8,300
Performance
Revenue declined marginally, which reflects the impact of £314m (AUD$558m) returned, through cash and premium increase
deferrals, to Australian health insurance customers in line with our commitment to not benefit from COVID-19 (£67m
(AUD$120m) in 2021 at CER). Excluding the undistributed COVID-19 claim savings, underlying profit increased due to
improved gross margin in Australian Health Insurance and lower costs in Australian Health Services. Our businesses continued
to experience impacts from COVID-19 as they emerged from the pandemic later compared to other Market Units. This led to
declined performance in aged care, due to lower occupancy and increased workforce costs.
In Australia Health Insurance, when excluding the undistributed COVID-19 claims savings, performance was driven by
customer growth, an enhanced portfolio mix and continued business transformation initiatives. The combined operating ratio
(COR)
7
was 90%
8
(2021: 92%). Since the pandemic started, we have returned, or committed to return, £492m (AUD$875m) to
customers, including in cash and premium increase deferrals. Recognising the importance of customer retention, we launched
Bupa Life Rewards, a member loyalty programme. Our digital health platform, Blua, was expanded to our international health
insurance customers, giving them 24/7 online access to consultations with general practitioners.
In Australian Health Services, revenue declined due to the divestment of our dental practices in New Zealand and clinician
vacancies. This was partially offset by new business revenue and growth in medical assessment volumes as COVID-19
lockdown backlogs were cleared. Underlying profit improved, driven by lower operating costs and increased customer demand
for optical and hearing services.
In Australian Villages and Aged Care, revenue and underlying performance declined. This was largely due to COVID-19
restrictions which contributed to workforce challenges and constrained admissions as well as the sale or closure of nine homes
in 2021. Closing occupancy was 84% (2021: 87%). Higher labour, infection prevention and control costs also contributed to the
decreases.
In New Zealand Villages and Aged Care, revenue was broadly in line with 2021 as new developments and government funding
increases offset divestments and site closures. Underlying loss increased primarily due to the impact of COVID-19 on
occupancy, as well as higher labour costs. As part of continued portfolio optimisation, we opened a new retirement village and
adjacent care home and closed three care homes. Closing occupancy was 87% (2021: 88%).
In Hong Kong SAR, revenue increased due to strong COVID-19 vaccination clinic volumes and pricing. We provided more than
12,500 virtual consultations and opened seven new medical and dental centres. This was despite COVID-19 restrictions in
place during the first half of the year and visitor entry restrictions remaining in place for the majority of the year. The impact of
COVID-19 on insurance claims did however contribute to an underlying loss.
In November, we announced that Hisham El-Ansary, CEO for Asia Pacific, will step down at the end of March 2023 with an
executive search process currently underway to find his replacement. Nick Stone, currently CFO for Asia Pacific, will become
Acting CEO.
Strategic Report
For the year ended 31 December 2022
6
7
Combined operating ratio is an alternative performance metric for insurance businesses. It is calculated based on incurred claims and operating expenses divided by net
earned premiums.
8
Bupa HI Pty Ltd (Australia): Based on S.05.01 Prudential Regulation Authority (SII) form (estimated and unaudited).
Europe and Latin America
Revenue
Underlying profit
2022
£4,560m
£259m
2021 (AER)
£4,004m
£185m
% growth
14%
40%
2021 (CER)
£3,935m
£189m
% growth
16%
37%
Health insurance
customers (m)
Healthcare provision
customers (m)
Aged care residents
2022
5.1
12.8
5,600
Performance
Revenue grew by 16% to £4,560m with underlying profit increasing by 37% to £259m at CER. This included £40m profit as a
result of applying higher CPI to historical periods in line with a Public Private Partnership hospital contract in Spain. Excluding
this, underlying profit growth was driven by organic customer growth in our Spanish health insurance business, Sanitas
Seguros, and in our business in Poland, LUX MED, alongside improved occupancy within our aged care business in Spain,
Sanitas Mayores.
Health insurance in Spain, delivered good revenue growth with over 100,000 more lives insured. Underlying profit increased
through both portfolio growth and price increases which offset some inflationary headwinds. We reached the milestone of two
million customers in June 2022, with distribution agreements with bancassurance partners contributing to more than a third of
sales. The COR for the full year was 89%
9
(2021: 88%).
Our dental business in Spain continued to deliver good customer growth leading to improved revenue and underlying profit. We
opened four new dental centres and acquired one that was previously operating through a franchise model.
In our Hospitals and New Services business in Spain, revenue and underlying profit increased after applying the historical CPI
catchup, noted above. We also opened a new laboratory and are building a new hospital in Madrid, which we expect to open in
2025.
In Sanitas Mayores, our aged care business in Spain, underlying profit increased due to improved occupancy as we continued
to emerge from the pandemic (closing occupancy was 93%, up 6 ppts). In addition, a new version of our BluaU app to support
access to home care services, was launched.
In Chile, while there was some revenue increase in our Isapre insurance business due to permitted price increases from 2021,
losses increased as a result of the judicial and regulatory action affecting the industry, which has had a significant negative
impact on pricing. The Isapre industry challenges are summarised in the Note on Chile on page 4. In health provision, revenue
improved due to higher volumes and prices and increased activity in our Santiago hospital, however underlying profit was
impacted by inflation. We also opened a new medical centre in Santiago.
In Poland, LUX MED delivered robust revenue and underlying profit growth mainly from new corporate subscriptions. Insurance
revenue was ahead of prior year, but profit remained broadly flat due to higher claims. A new health insurance product with
inpatient coverage was launched to around 20,000 new net members.
In Bupa Acıbadem Sigorta, our health insurance business in Türkiye, revenue increased due to both corporate and individual
customer growth and pricing actions to counter high inflationary pressure. Underlying losses worsened from higher claims
linked to increasing medical inflation.
Care Plus in Brazil delivered strong revenue and customer growth, however, underlying profit decreased as a result of higher
claims volumes and inflation.
Bupa Mexico delivered good revenue growth through increased customer numbers and new products. Underlying profit
however declined due to higher volumes of claims and inflation. We signed a ten year coinsurance and reinsurance deal with
our partner, HDI, which will provide access to over 7,000 agents to distribute products. We also acquired a new hospital in
Mexico City.
Bupa Global Latin America generated an underlying profit by maintaining high customer retention alongside premium increases
to offset higher claims inflation.
Strategic Report
For the year ended 31 December 2022
7
9
Sanitas S.A. de Seguros (Spain): Prepared under local GAAP (unaudited).
Bupa Global and UK
Revenue
Underlying profit
2022
£3,752m
£39m
2021 (AER)
£3,396m
£78m
% growth/(decline)
10%
(50%)
2021 (CER)
£3,432m
£76m
% growth/(decline)
9%
(49%)
Health insurance
customers (m)
Healthcare provision
customers (m)
Aged care residents
2022
3.0
3.3
6,300
Performance
Revenue was up 9% to £3,752m and underlying profit decreased by 49% to £39m at CER. Excluding £117m of impairments to
right of use leases and fixed assets in our dental business, underlying profit increased driven by higher volumes in UK
Insurance and improved performance in Bupa Global, our international health insurance business. Revenue growth in health
provision and aged care was offset by heightened costs in an inflationary environment.
UK Insurance increased revenue and underlying profit through strong growth in customer volumes and premium increases
required to offset inflationary pressures on claims and staff costs. We grew by over 275,000 net customers across medical
insurance, health trusts, dental and cash plan, passing the milestone of three million lives covered. We continue to expand
digital services with the launch of Blua, our new digital healthcare platform, which provides customers with easy 24/7 access to
primary care services.
We launched new propositions, including ‘Inclusive Health’ for corporate customers, covering women’s health, sexual health
and neurodiversity. For our insurance customers, we launched a new specialist centre for prostate cancer within our Cromwell
Hospital and increased the number of specialist centres for breast and bowel cancers.
In Bupa Global, revenue and underlying profit increased as a result of strong customer retention and new business sales, cost
management and improved loss ratios due to pricing action. Across our regions, we continued to develop customer
propositions, delivering product variants that respond to distinct local needs. We also implemented new claims adjudication and
healthcare management systems to continue to help our customers access high quality, good value care.
The COR for Bupa Insurance Limited, the UK based insurance entity that underwrites both domestic and international
insurance, improved to 94%
10
(2021: 97%).
UK Dental’s underlying losses increased due to sector-wide pressures, including an ongoing shortage of dentists, particularly
for NHS work, increased staff costs and high inflation. With new leadership in place, a strategic review is underway to drive the
turnaround and growth of this business. We added over 12,000 new customers to our new digital B2C subscription product, the
Bupa Smile Plan.
UK Care Services delivered higher revenue due to the continued post-pandemic recovery of occupancy levels, combined with
higher income from both private- and public-funded residents. This was largely offset by sector-wide staffing challenges, high
energy costs and other inflationary pressures. We continued to drive transformation through digital innovation in our sites
including the rollout of an electronic care planning system which is now in place across 10 Richmond Villages and 75 care
homes. Closing occupancy rates increased to 87% (2021: 84%).
In Health Services, revenue increased from strong growth in health assessments, mental health and primary care services, and
higher customer volumes in The Cromwell. We opened two new health clinics and reorganised our clinic network as we will end
our franchise arrangement with Spire Healthcare in 2023. The Cromwell saw an increase in self-pay and international activity
driven by complex cancer, transplant and cardiothoracic care.
Strategic Report
For the year ended 31 December 2022
8
10
Bupa Insurance Limited: Prepared under local GAAP.
Other businesses
Revenue
Underlying profit
2022
£7m
£58m
2021 (AER)
£5m
£45m
% growth
40%
29%
2021 (CER)
£6m
£50m
% growth
17%
16%
Health insurance
customers (m)
Healthcare provision
customers (m)
2022
11.8
0.3
Performance
Underlying profit was up 16% to £58m driven by steady customer growth and favourable investment returns in Bupa Arabia
alongside significant customer growth and improved loss ratios in Niva Bupa in India.
FINANCIAL REVIEW
Overview
Revenue of £14.0bn was up 7% (2021: £13.1bn at CER) with growth in all our business lines and underlying profit
11
was
£693m, up 37% (2021: £506m at CER) as a result of strong customer demand and included a number of one-off exceptional
trading items in our Market Units, which are broadly neutral at a Group level.
During 2022, global inflation rose sharply resulting in higher central bank interest rates, leading to increased cost of capital
which reduces the valuation of business units for impairment testing. There were asset impairments across goodwill, other
intangibles and tangible assets during the second half of the year totalling £1bn. The material Business Unit impairments were
UK Dental (£646m), Bupa Chile (£161m), BVAC Australia (£103m) and UK Care Services (£90m). These were the result of
macroeconomic, and in some cases, sectoral and operational factors which are further detailed below.
Statutory loss before taxation of £306m is a decline from a profit of £537m in 2021 (a 157% decline at AER).
Net cash generated from operating activities was £1,039m up £88m on prior year (2021: £951m
12
) primarily due to strong
underlying trading performance of our insurance business.
Solvency II capital coverage ratio remains strong at 181% (2021: 179%) reflecting positive underlying performance with
leverage (excluding IFRS 16 liabilities) improving to 19.1% (2021: 20.4%).
We continue to hold a good level of Group liquidity. At 31 December 2022, our £900m Revolving Credit Facility was drawn by
£70m (2021: £150m). Coverage of financial covenants within the facility remains strong.
Revenue (CER)
Revenue was up 7% due to customer growth in health insurance, increased activity in our provision businesses and higher
occupancy in most aged care businesses post-pandemic.
Revenue in health insurance was up 7% as customer numbers increased and, although we sought to manage costs for
customers as much as possible, premiums rose to address global inflation. This was partially offset by cash returns to
customers and premium increase deferrals in our Australian health insurance business where we delivered on our commitment
to not benefit from COVID-19. Insurance customer growth of 8% represented nearly one million more lives (16% when including
our associate businesses) driven by strong growth in the UK and continued growth in our Australian, Polish, Turkish, Spanish
and Brazilian businesses.
In health provision, revenue grew by 8%, reflecting over two million additional customers as demand for health services
increased and the impacts of COVID-19 largely subsided, but still remained in places. Dental revenue however was impacted
by sector-wide clinician shortages across several of our markets and the divestment of some practices in New Zealand.
Strategic Report
For the year ended 31 December 2022
9
11
Underlying profit is a non-GAAP financial measure. This means it is not comparable to other companies. Underlying profit reflects our trading performance and excludes
a number of items included in statutory profit before taxation, to facilitate year-on-year comparison. These items include impairment of intangible assets and goodwill
arising on business combinations, as well as market movements such as gains or losses on foreign exchange, on return-seeking assets, on property revaluations and
other material items not considered part of trading performance. A reconciliation to statutory profit before taxation can be found in the notes to the consolidated financial
statements.
12
2021 has been restated for the implementation of the IFRS Interpretations Committee agenda decision on Demand Deposits with Restrictions on Use arising from a
contract with a Third Party. See Note 1.5a for further detail.
In aged care, revenue was up 4% as occupancy rates increased by 1.6 ppts driven by our Spanish and UK businesses as they
continued to emerge from the pandemic. COVID-19 challenges remained in our Australian and New Zealand businesses,
however, as localised restrictions and sector-wide staffing availability continued to impact our ability to welcome new residents
and reduced occupancy rates in this region.
Underlying profit (CER)
Group underlying profit increased by 37% to £693m (2021: £506m at CER).
Underlying profit includes one-off items that are related to trading but are exceptional in nature. There was £66m of additional
profit in Asia Pacific which we have attributed to undistributed health insurance claims savings related to COVID-19. This is
intended to be returned to customers in the future in line with our commitment to not benefit from the pandemic. In Europe and
Latin America, profits were £40m higher as a result of applying higher CPI to rates in historical periods in line with a Public
Private Partnership hospital contract in Spain. In our BGUK Market Unit, UK Dental has been impacted by higher Weighted
Average Cost of Capital (WACC) rates and reduced profit expectations which has led to impairments of goodwill, customer
intangibles, fixed assets and right of use leases. The tangible asset impairments are £117m and are included in underlying
profit. The net impact of these across our Market Units was an £11m downside.
For our largest line of business, health insurance, underlying profit increased from good customer growth, alongside both
premium increases and careful cost management, which broadly offset higher claims and operating costs caused by the
inflationary environment.
As noted on page 4, in Chile, we continue to see the negative impacts of judicial and regulatory action affecting the entire Isapre
insurance industry which have caused underlying losses to grow in our Isapre business, Isapre Cruz Blanca.
Profitability further increased in our health provision businesses, as COVID-19 restrictions reduced in 2022. However, we
continue to see challenges in our dental business, particularly in the UK, driven by sector-wide pressures, including an ongoing
shortage of available clinician hours.
Underlying losses in aged care increased year-on-year. In Spain, profits improved from higher customer volumes as the
business emerged from the pandemic (closing occupancy 92.8% was up 5.9 ppts). However, this was more than offset by
challenges in Australia and New Zealand which were impacted from temporary closures in the first half of 2022, resulting from
COVID-19, along with workforce availability constraints, and in the UK, which faced higher staff and energy costs in a
heightened inflationary environment.
Central expenses and net interest margin of £6m were lower (FY 2021: (£65m) at CER). This was driven by higher investment
returns from increased interest rates, and reduced costs from the early redemption of the £250m subordinated bond and
maturity of a £350m senior bond in 2021.
Statutory (loss)/profit (AER)
Statutory loss before taxation was (£306m), a 157% decline at AER (FY 2021: £537m profit), driven by certain non-underlying
items which contributed a £999m loss in 2022, compared with £28m profit in 2021.
The key drivers for non-underlying items in 2022 were the impairments of goodwill and intangible assets:
•
UK Dental (£529m), due to increased WACC rates and a deterioration of the underlying forecast cash flows of the
business following below target recruitment and retention of clinicians, combined with increased wage and energy
costs, during the second half of 2022.
•
Bupa Chile (£161m), driven by increased WACC rates and reductions in future cash flow forecasts reflective of the
judicial and regulatory action affecting the Isapre industry summarised on page 4.
•
Bupa Villages and Aged Care Australia (£103m) due to increased WACC rates in the period and future cash flows
affected by lower occupancy and higher future staff costs expected from implementing minimum mandatory care
minutes for residents.
•
UK Care Services (£90m) due to an increase in WACC rates.
Also included was the amortisation of intangible assets in Bupa Villages and Aged Care Australia following the government
announcement in 2021 to deregulate bed licences from 2024 (£34m) and the loss on return seeking assets, net of hedging of
(£39m). Türkiye is considered a hyperinflationary economy, as a consequence the results and balances for the Group's Turkish
operations being adjusted for changes in the general purchasing power of the Turkish Lira (£31m) and this is recognised in
"realised and unrealised foreign exchange (losses)/gains".
Strategic Report
For the year ended 31 December 2022
10
2022
£m
2021
£m
Bupa Asia Pacific at CER
331
256
Europe and Latin America at CER
259
189
Bupa Global and UK at CER
39
76
Other businesses at CER
58
50
Underlying profit for reportable segments at CER
687
571
Central expenses and net interest margin at CER
6
(65)
Consolidated underlying profit before taxation at CER
693
506
Foreign exchange re-translation on 2021 results (CER/AER)
-
3
Consolidated underlying profit before taxation at AER
693
509
Impairment of intangible assets and goodwill arising on business combinations
(888)
(18)
Net (loss)/gain on disposal of businesses and transaction costs on business combinations
(4)
13
Net property revaluation (loss)/gain
(5)
16
Realised and unrealised foreign exchange (loss)/gain
(12)
5
Amortisation of bed licences
(34)
-
Other Market Unit non-underlying items
(21)
23
Group non-underlying items
4
(14)
(Loss)/gain on return-seeking-assets, net of hedging
(39)
3
Total non-underlying items
(999)
28
Statutory (loss)/ profit before taxation at AER
(306)
537
Taxation
The Group’s taxation expense for the year was £112m which represents an effective tax rate of (37)% (2021: 18%). This is
mainly due to the net tax impact of one-off goodwill and fixed assets impairments and IAS 29 adjustments applied as a result of
hyperinflation in Türkiye for which no tax deductions can be claimed. If these exceptional items were excluded from the Group’s
profit before taxation, the effective tax rate would be 28%, which is higher than the UK corporation tax rate of 19%. This is
mainly due to profits arising in jurisdictions with a higher rate of corporate income tax. The 2021 effective tax rate was lower
than the UK corporation tax rate mainly driven by a prior year credit of £43m following a favourable court decision in Spain.
Cash flow
Net cash generated from operating activities increased by £88m period on period, to £1,039m with strong business
performance translating into higher revenues being received in the period.
Cash generation has in turn driven the increase in cash used in investing activities by £658m to £873m, as that cash has been
invested into financial assets on the balance sheet. Net cash used in financing activities is also stable, decreasing by £52m to
£548m, with Group reducing debt balances in the period by £173m.
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 2022
with Moody’s changing the outlook for Bupa’s ratings to stable from negative. Fitch held Bupa's ratings and outlook steady
during the year.
We continue to hold a good level of Group liquidity. At 31 December 2022, our £900m Revolving Credit Facility was drawn by
£70m (2021: £150m). Coverage of financial covenants within the facility remains strong.
We focus on managing our leverage in line with our credit rating objectives. Leverage excluding IFRS 16 leases at 31
December 2022 was 19.1% (FY 2021: 20.4%) and was 27.0% (FY 2022: 27.9%) when IFRS 16 lease liabilities are included.
Solvency
Our solvency coverage ratio of 181%
13
remains strong and is above our target working range of 140-170%.
The Group holds capital to cover its Solvency Capital Requirement (SCR), calculated on a Standard Formula basis, considering
all our risks, including those related to non-insurance businesses. As at 31 December 2022, the estimated SCR of £2.7bn was
£0.2bn higher and Own Funds of £4.9bn was £0.4bn higher when compared to 31 December 2021.
Our surplus capital was estimated to be £2.2bn, compared to £2.0bn at 31 December 2021, representing a solvency coverage
ratio of 181% (2021: 179%). Our business continued to generate capital through our underlying profitability.
Strategic Report
For the year ended 31 December 2022
11
13
The 2022 Solvency II capital coverage ratio is an estimate and unaudited.
This capital generation was partially offset by capital expenditure, debt financing activities, asset impairments and the regulatory
recognition of a material contingent liability in relation to Isapre Cruz Blanca in Chile, as detailed in Note 28.
We perform an analysis of the relative sensitivity of our estimated solvency coverage ratio to changes in market conditions and
underwriting performance. Each sensitivity is an independent stress of a single risk and before any management actions. The
selected sensitivities do not represent our expectations for future market and business conditions. A movement in values of
properties that we own continues to be the most sensitive item, with a 10% decrease having a 11% percentage point reduction
to the solvency coverage ratio.
Our capital position is resilient in the face of the individual risks, illustrating the strength of our balance sheet.
Risk Sensitivities
Solvency II coverage
ratio
Solvency coverage ratio
181%
Property values -10%
170%
Loss ratio worsening by 2%
174%
Sterling depreciates by 20%
174%
Group Specific Parameter (GSP) +0.2%
14
179%
Credit spreads +100bps (no credit transition)
180%
Interest rate -100bps
180%
Pension risk +10%
181%
Equity markets -20%
181%
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.
IFRS17 Insurance Contracts
IFRS 17 Insurance Contracts was issued in May 2017 as a replacement for IFRS 4 Insurance Contracts. The final standard is
effective for annual periods beginning on or after 1 January 2023. We have completed our assessment of the adoption of the
standard, including setting our accounting policies and estimating the impact on our balance sheet at transition. For a large
majority of its business, the Group will apply the simplified Premium Allocation Approach and, together with the policy choices
set out in the Group’s Annual Report and Accounts, this means our revenue recognition is materially consistent with that used
under IFRS 4. The Group’s net assets at transition on 1 January 2022 are reduced by an estimated £55m. We will report on an
IFRS17 basis at HY 23, which will include the opening 2023 statement of financial position.
Section 172 statement
Promoting our long-term success and sustainability
This statement sets out how the Board has acted in a way that promotes the Company's success in achieving its purpose of
helping people live longer, healthier, happier lives and making a better world. Bupa’s status as a company without shareholders
means that we can focus on the long-term achievement of our purpose and reinvest our profits into providing more and better
healthcare for the benefit of current and future customers.
When making decisions, the Board takes into account:
▪
The likely long-term impact of the decision
▪
The interests or concerns of, and impact on, our key stakeholders
▪
The impact of our decisions and operations on the communities in which we operate and the environment
▪
The need to maintain a reputation for high standards of business conduct.
Engaging with our key stakeholders
We consider our Parent, customers, people, bond investors, suppliers and regulators to be our key stakeholder groups, and
their views and concerns are taken into account in developing our business model and strategy.
The Board endeavours to gain an understanding of the perceptions and attitudes of each stakeholder group and the weight they
give to different issues. Where the views of different stakeholder groups do not align, the Board must decide on the best course
Strategic Report
For the year ended 31 December 2022
12
14
Group Specific Parameter (GSP) is substituted for the insurance premium risk parameter in the standard formula, reflecting the Group’s own loss experience.
of action to promote the Company's and Bupa’s long-term sustainability and success. It is important for all levels of the business
to engage with stakeholder groups to gain a better understanding of their interests and concerns and the impact our decisions
have on them.
More detail on how we engage with our key stakeholder groups or where to find more information is set out below.
Customers
Our ambition is to be the world’s most customer-centric healthcare company and our three ambition KPIs all relate to our
customers, putting them at the heart of everything we do and making them our most important stakeholder group. We are
committed to providing excellent customer experience, through great service and value, frictionless access and quality
healthcare.
Direct customer feedback is an important tool to help us improve their experience and our leaders in all areas of the business
are encouraged to use our Customer Listening app to gain insights on the issues that customers raise and to provide feedback
to the businesses across Bupa on how customer experiences could be improved.
The Bupa Board received regular updates during 2022 on the progress against the three ambition KPIs and the emblematic
project to drive customer experience improvements.
People
Our people are at the heart of our business, supporting our customers every day. We want our people to feel engaged and
empowered to deliver great outcomes for our customers, to feel that Bupa is a great place to work and to be healthier and
happier themselves. Our Global People Framework sets out the priorities that we focus, taking into account both the external
employment context and the needs of our people, and is shared with the Bupa Board annually for its review and endorsement.
As we operate several lines of business in numerous markets and countries, local people priorities are also set on the issues
important to our people by market, country and business. This includes our focus on driving engagement, which is owned
locally right down to the individual leader level. Our employee engagement results are shared and discussed with the Bupa
Board twice a year. Three Bupa Non-Executive Directors have been designated to engage with our people in the UK, Australia
and Spain - our three largest markets - and they participate in a series of events in those markets throughout the year. These
are usually in the form of site visits, sessions with People teams, town hall meetings with employees and smaller group events
where open dialogue and Q&A is encouraged. Their findings are regularly reported back to the Bupa Board.
People issues are flowed up to the Bupa Board through regular reports from the Group CEO, and as part of updates to the
Bupa Board from Bupa's businesses. In 2022, these covered workforce challenges, talent and leadership updates, and actions
taken in support of these areas. The Chief Sustainability and People Officer provides updates during the year on progress
against the Global People Framework, including talent and succession, leadership development, inclusion and diversity, gender
pay gap and incentives. The Bupa Board also receives reports on issues raised through Bupa's Speak Up internal confidential
whistleblowing service.
People issues also flow through to the Bupa Risk Committee with regular reports on people-related risks, from the Chief Risk
Officer and the Chief Sustainability and People Officer.
Regulators
The Bupa Group operates in highly regulated environments across our health insurance, provision and aged care businesses.
We are subject to financial services regulatory regimes in our insurance businesses and care quality regulators in our provision
and aged care businesses. In some cases our regulators are independent of governments, and in other situations our activities
are directly regulated by national or local governments. As a bond issuer, the Company is regulated by the UK Listing Authority
of the Financial Conduct Authority (FCA) and complies with the relevant requirements of the FCA Handbook.
Regulators ultimately aim to make sure that we have the financial resources and the risk management framework necessary to
protect customers and ensure that they receive high levels of care and are treated fairly. These objectives clearly align with our
strategy and customer-centric ambition. Our regulators expect us to:
▪
Maintain sufficient capital, with specific requirements for reserves in our insurance businesses
▪
Provide high-quality, clinically robust services
▪
Ensure that we operate in a responsible and sustainable way
▪
Have robust and effective processes and controls in place to mitigate risks to protect our customers.
The Bupa Group is firmly committed to achieving high standards of compliance with our regulatory obligations in all of the
markets in which we operate. Increased levels of regulation, and liaison between regulators, are a continuing international
Strategic Report
For the year ended 31 December 2022
13
trend. Therefore, we take a proactive and coordinated approach to managing the regulatory risks to which we are exposed in
order to reduce the risk of our customers suffering detriment, and minimising any financial or reputational impact on Bupa.
We have a Group-wide Regulatory Compliance Risk Policy in place to ensure high standards of compliance with the
requirements of all relevant regulators. We have a regular programme of interaction with the Bupa Group’s lead insurance
regulator, the Prudential Regulation Authority (PRA), and engage with them on key decisions of the Board and the Bupa Board.
Senior members of the executive team, the Bupa Chairman and the Chairs of the Bupa Board’s standing committees have
regular meetings with the PRA. Relationships with other regulators are maintained at a local level by our Market Unit and
Business Unit management teams, with subsidiary board interaction with local insurance regulators, as appropriate.
Bond investors
The Company has a series of debt securities in issue and is therefore required to operate in accordance with the relevant UK
Listing Rules and the Disclosure Guidance and Transparency Rules, and with the Market Abuse Regulation.
Briefing calls are held for bondholders to discuss the full year and half year results. This provides an opportunity for them to
question management on the Bupa Group’s financial performance and strategy. We hold roadshows for current and prospective
bondholders during the year, and other significant developments are communicated via regulatory announcements, press
releases and published on our website, bupa.com. Investors are interested in the Group’s financial performance and strength
and increasingly also in our sustainability and wider ESG activities.
Suppliers and partners
Our suppliers and partners represent our brand and are critical to delivering a high-quality service to our customers. They
include systems suppliers and suppliers of products to our hospitals, clinics, dental centres and care homes.
Our Responsible Supply Chain Statement, available on bupa.com, sets out our expectations of our suppliers and our
commitments to them. The Statement was updated in late 2022 to include our desire to work with suppliers who share our
commitment to our sustainability targets and to work closely with them to innovate and find solutions to the biggest sustainability
challenges around healthcare.
We are committed to:
▪
Treating our suppliers fairly
▪
Paying suppliers on time (as per contracted terms)
▪
Selecting suppliers without prejudice
▪
Supporting improvements in social, environmental and ethical practices
▪
Using research, collaboration and innovation to accelerate sustainable healthcare solutions
▪
Maintaining a supply chain that reflects and aligns with our own standards of responsible business conduct
▪
Actively encouraging innovation.
We also have a Group-wide Suppliers Enterprise Risk Policy governing our processes for the selection, contracting and
management of all of our suppliers to ensure that they represent our values and will not compromise the service we provide to
our customers or how we treat our people. We work with our suppliers to ensure that they have effective processes in place to
protect our customers’ health and safety and the security and privacy of their data.
We also regularly engage with healthcare professionals and NGOs and work with other commercial and non-profit organisations
to make a positive impact on specific health issues.
Our sustainability strategy is founded on responsible business conduct with a key focus on responsible supply chain
management, including combating modern slavery. Our latest Modern Slavery statement can be found on bupa.com.
Communities and the environment
In 2022, the Bupa Board approved the new sustainability strategy and a revised sustainability enterprise risk policy to set out
our ambitions in this area and to ensure that sustainability risks and opportunities, including climate change risks, are
considered in day-to-day decision making.
This is the Bupa Group’s second year disclosing against the Taskforce on Climate-related Financial Disclosures (TCFD)
recommendations. The Bupa Group will continue to develop the detail of our TCFD disclosures as we complete further analysis
and strengthen our approach. For further details, please see page 101 of the Bupa Group’s Annual Report and Accounts 2022.
We help to build healthier and more resilient communities and aim to have a positive impact on the environment. We have
dedicated Foundations in Australia, Spain, the UK and other countries, to channel some of our investment.
Strategic Report
For the year ended 31 December 2022
14
High standards of business conduct
Bupa has a robust system of governance and risk management in place and operates a ‘three lines’ model to identify, manage
and mitigate risk, to ensure that we maintain high standards of business conduct. Bupa aims, where appropriate, to operate to
the same governance standards as are required of UK public listed companies and the Company complies with rules relevant
to debt issuers.
These include governance processes around decision-making; risk appetite statements set by the Bupa Board; and risk policies
and standards that are applied across the Group on areas including customer outcomes, people, capital management, supplier
management, risk, clinical governance, data quality, information security, privacy, and wellbeing, health and safety. Further
information on our principal risks and approach to risk management is on page 18.
All papers submitted to the Board are required to include a summary of key risks, how relevant stakeholders have been
considered in the proposals and the governance process undertaken prior to seeking Board approval to ensure that stakeholder
interests or concerns have been considered and that proposals have been through appropriate review and approval processes
prior to submission to the Board. This assists the Board in making well-informed decisions that promote the long-term,
sustainable success of the business.
As mentioned above, our sustainability strategy is founded on responsible business conduct management, to take a more
proactive approach to ensuring that Bupa conducts its activities in a responsible way. More details can be found in the
Sustainability and ESG section under Business ethics on page 33 of the Bupa Group's Annual Report and Accounts 2022.
The Governance section commencing on page 26 describes the role of the Board, the Directors, Bupa’s system of governance,
including the three lines model; how we have complied with the Code during the year; and the role and activities of the Bupa
Audit and Risk Committees.
Strategic decisions and their impact on stakeholders
The table below sets out a number of decisions taken during the year and how stakeholder views were taken into account. Most
of these decisions were taken by the Bupa Board but impact the Group and are therefore relevant to the Company.
Chile - Customers, regulators, bond investors
One of Bupa’s businesses in Chile, Isapre Cruz
Blanca S.A. (Cruz Blanca), has been negatively
impacted by judicial and regulatory action. The
Isapre sector is unique to Chile in that, despite
being privately-owned companies, they form part of
the wider social security system through which
Chilean citizens can chose public or private health
insurance. There has been a shift in recent years
which has severely limited Cruz Blanca’s ability to
properly price to cover risk, medical inflation, and
medical coverage
Action
During the year, the Bupa Board has been closely monitoring political,
legal and regulatory developments in Chile. In line with Bupa’s subsidiary
governance policy, the Bupa Board has also received updates from the
board of Bupa Chile (the parent company of Cruz Blanca). The Bupa
Board also received briefings on the Chilean constitutional referendum
and recent Supreme Court decisions. The Bupa Risk Committee has
also been monitoring the related "stroke of pen” risk. The potential
impact of the judicial decisions and regulatory interventions on Bupa’s
balance sheet is material and a significant contingent liability position has
been disclosed in the Group’s Consolidated Financial Statements for
2022. The Bupa Audit Committee has closely scrutinised management’s
approach to assessing this contingent liability to ensure that it was
appropriate.
Stakeholder considerations
We seek to keep the rating agencies up to date with material
developments which may impact the Group’s results and performance
and will continue to do so as the situation evolves. The Bupa Board has
also been considering the impacts for customers, providers, employees,
local regulatory relationships, and the Group’s and the local brand and
reputation as part of its Group-level oversight of Bupa Chile’s developing
strategy.
Long-term impact
The Bupa Board continues to monitor the long-term viability of Cruz
Blanca and has considered a broad range of potential adverse outcomes
from the Chile Supreme Court judgment described on page 4 in its
assessment of the Company’s and the Group’s longer-term viability,
as described on page 41.
Strategic Report
For the year ended 31 December 2022
15
Dividends – shareholder, investors, customers
The Board needs to manage the desire for its
Parent to receive dividends with the funding
required by the business to achieve the Group’s
objectives, and the need to maintain the financial
strength of the Company.
Action
The Board approved two interim dividends during the year.
Stakeholder considerations
The Board considered the expected level of funding required by its
subsidiaries to achieve the Bupa Group’s strategy and the financial
strength of the Company prior to approving and authorising the payment
of an interim dividend.
Surplus funds which are not distributed to the shareholder are reinvested
back into the business to help achieve the Group’s purpose and strategy.
Long-term impact
Prudent financial management supports the long-term success of the
Company and its shareholder, Bupa, motivates management to deliver
strong and sustainable business performance, and maintains the
strength of the Company’s creditworthiness rating as a bond issuer.
Treasury management – customers, people, shareholder and suppliers
The Company needs to ensure that it, and its
subsidiaries, can meet their financial obligations.
Action
The Board took treasury management decisions during the year to
ensure that the Company and the Bupa Group met their financial
obligations.
Stakeholder considerations
Stable performance and liquidity provides reassurance to suppliers that
they will be paid on a timely basis for the products and services they
provide, to employees that they will be paid on time and that investment
will be made to enhance working practices and systems, and to
customers that they are receiving products and services at a reasonable
cost and that Bupa will support their needs over the long-term.
Long-term impact
Managing the Company’s and the Group’s liquidity mitigates operational,
financial and reputational risk and thereby ensuring the Bupa Group’s
sustainability.
Financial statements – investors, regulator and high standards of business conduct
The Company’s and Group’s accounts must give a
true and fair view of the business and comply with
all relevant legislation and regulation.
Action
The Board approved the Company’s 2022 Half-Year Results and 2022
Annual Report on the recommendation of the Bupa Audit Committee.
Stakeholder considerations
These ensure that investors have relevant information on the Company’s
performance which they can use to base investments decisions on.
Results presentations are conducted for bondholders and analysts to
attend and ask questions.
Long-term impact
This provides assurance to investors of the Company’s ability to maintain
its obligations related to its listed debt securities.
Strategic Report
For the year ended 31 December 2022
16
Risk
Embedding a strong risk management culture is a priority across Bupa supported by robust risk management and
controls.
This focus on culture is essential in order to respond to changing environments and evolving regulation. This means we can
foresee the potential risks of future changes that could affect our customers and our business, and to mitigate them. Together
with our controls, ensuring a strong risk culture helps us to continue to serve our customers well and meet all of our
stakeholders’ expectations.
Our comprehensive risk management programme ensures that risk management comes as second nature to everyone at Bupa
and they are equipped to manage risk. We have tools in place to achieve this, including The Bupa Code, our code of conduct,
risk appetites, Enterprise Policies and our Speak Up whistleblowing process.
We are continuing to raise our standards and expectations in order to ensure the right outcomes for our customers, our markets
and our business.
Our local businesses are exposed to a wide range of political, regulatory, legal and economic risks. Our health insurance,
provision and aged care activities also carry different risk profiles including clinical risk.
We make sure we are in the best place to manage and diversify our risks, including emerging and strategic, by understanding
the factors behind the risk to each individual business and to our balance sheet, and by assessing how these risks interact.
We manage our risks using a 3 lines model as set out in our Bupa Board approved risk management framework. Our Board
approved risk appetite is a measure of the degree of risk we are prepared to accept in our work to deliver on our strategy.
Our core risk appetite statements focus on:
◦
The treatment of customers and employees
◦
Management of our financial strength
◦
The sustainability of our business and
◦
Operational risk, including information security; privacy and clinical risks.
The risk appetite statements are reviewed annually, with the Bupa Risk Committee recommending any changes to the
statements to the Bupa Board for approval.
Progress in 2022
We continued to strengthen our approach to risk management during the year and have further embedded this capability
within the business. Our approach is in line with the evolution of our business as a whole and the nature of how risks are
evolving globally.
While we have continued to put focus on managing the impacts of the pandemic and the ongoing economic uncertainty, we
have ensured that we continue to focus on the wider risk management agenda throughout the year. With a new strategy and an
enhanced purpose, we have also placed significant emphasis on the risks associated with the new strategy, including:
•
Conducting in-depth reviews of specific aspects of risk as they arise in the external environment and focusing on
specific areas of risk for our businesses
•
Reviewing recent experiences or events, including the pandemic, to assess what lessons could be learned and
implemented across the Group
•
Review of our strategic and emerging risk profiles with a particular emphasis on how these are likely to be affected by
the prevailing high inflation and challenging economic environment
•
Reviewing our climate change risk profile and the risks associated with our new sustainability strategy
•
Reviewing and enhancing our credit rating, foreign exchange and risk appetite and approving insurance risk appetite
statements;
•
Undertaking a stress and scenario testing programme to improve our understanding of severe risks and how they
may affect the business plan in both our insurance and healthcare provision businesses. The primary focus in this
year was on high inflation and a challenging economic environment.
•
Reviewing the progress in embedding our integrated risk management system.
•
Oversight and approval of the development of the Group Recovery and Resolution Plan
•
Reviewing the risks associated with our workforce relating to the resilience of our staff but also the strategic risks
associated with workforce availability
•
Continuing to improve our information security and privacy controls to respond to the ever-evolving and increased
threats in the external environment
•
Continuing to improve our wider information technology and IT operational resilience controls
Strategic Report
For the year ended 31 December 2022
17
Risk profile
We accept risk as part of our business. Some risks are
avoidable
while others are inherent in our business model. We have an
effective risk management system and internal controls in place to mitigate these risks.
We maintain significant economic capital as a means of mitigating certain inherent risks. This reflects the nature of our
operations and the level of risk associated with them. These risks are set out in the table below in order of the solvency capital
required to mitigate them.
Risk
Description
Comment and outlook
Mitigating actions
Property
The risk of the volatility in values or
the devaluation of properties held for
own use (including owned care
provision properties), or for
investment purposes, resulting in
adverse impacts.
This includes capital associated with
leased properties following the
introduction of IFRS 16.
We generally own rather than rent
property. This could leave us exposed
to falls in property values.
Care home valuations are based on
their trading potential based on
discounted cash flow techniques.
The properties are subject to external
valuations at least tri-annually and
management valuations in intervening
years.
By maintaining a geographic spread of
businesses across a number of countries,
we are able to diversify exposure to
national or regional property markets and
trading conditions.
Insurance
Risks relating to our insurance
businesses. Risk of inadequate
pricing and/or underwriting of
insurance policies, of claims
experience being materially
adversely different to expectations
and that provisions made for claims
prove to be insufficient in light of later
events and claims experience.
Health insurance is short-tailed with
lower outstanding claims as a
percentage of revenue than most
general insurers.
Insurance risk exposure will grow in
step with planned growth in premium
income of the insurance businesses.
While absolute claims across the
Group are higher than prior year, there
continues to be reduced claims in
some markets from restrictions causing
short-term delays to elective
healthcare. The average cost of claims
that have been deferred could
increase, as a consequence of the
delay in treating progressive illnesses.
The relatively short-tailed nature of Bupa’s
products allows us to respond to market
changes quickly, although this can be
limited by government-set pricing controls
in some markets.
There is a relatively low exposure to
reserving risk compared to underwriting
risk due to the very short-term nature of
our claims development patterns.
We have extensive control mechanisms in
place, including holding an appropriate
prudence margin, to ensure that reserves
are adequate to mitigate against the risk of
higher-than-expected claims costs.
The geographical diversity of Bupa offers
further mitigation against insurance risk.
We have reviewed and updated our
insurance risk appetite.
Currency
Risk arising from changes in the
level or volatility of currency
exchange rates impacting on cash
flows and assets held in currencies
other than sterling, and on the
financial statements.
As the net assets of businesses
outside the UK grow, there will be a
corresponding increase in currency risk
in relation to translation into sterling.
There is transaction risk relating to
policies for which premiums and claims
are in different currencies.
Currency translation risk is mitigated
through a hedging programme to a Board-
approved level of risk.
We limit currency risk exposure through
asset liability matching in local currencies.
We have reviewed and updated our
currency risk appetite.
Strategic Report
For the year ended 31 December 2022
18
Credit spread
and counterparty
default
Risk of a loss in value of bond assets
and/or that a counterparty fails to
meet its obligations in the face of
adverse economic conditions. This
also includes the risk of a loss in
value of the bond assets held within
the pension schemes.
Our health insurance businesses have
modest holdings of corporate and other
bonds.
These are exposed to the risk of
widening spreads and defaults.
There is banking counterparty default
risk in respect of deposits.
The counterparty risk exposure in
respect of reinsurance is not material
at a Group level.
Our bond portfolio is small in relation to our
other financial assets and the majority is
investment grade.
Counterparty exposure is managed by
dealing with highly-rated counterparties
with exposure limits defined by Group
Treasury Policy.
Operational
(including
conduct risk and
clinical risk)
Risk of loss arising from inadequate
or failed internal processes, or from
personnel, systems or external
events. This risk also includes
conduct risk (the risk that our
behaviours, actions or controls result
in detriment or unfair outcomes for
our customers), and clinical risk (the
risk of injury, loss or harm to
customers in receipt of healthcare).
We are committed to managing
operational risks effectively. This
includes continued close attention to
management of regulatory risk and
proactive engagement with regulators.
Maintaining internal control processes and
governance frameworks, approving risk
policies and assessing compliance help to
mitigate this risk.
The Group Clinical Function, led by the
Group Chief Medical Officer, is responsible
for ensuring clinical quality and governance
within the business.
Other significant risks to Bupa, such as operational risk, cannot be effectively mitigated through holding capital alone, although
we do hold significant capital for operational risks. Our Market Unit Executive Risk Committees regularly review these residual
risks and the mitigating actions taken to reduce them. They also inform the Bupa Risk Committee and BERC about key areas of
specific concern. This provides management with a view of the priority areas in which resources should be focused. The table
below reflects the themes of the most significant risks currently facing Bupa. Strategic and operational risks remained
heightened due to the challenging economic environment and the launch of our new strategy.
Risk
Description
Comment and outlook
Mitigating actions
Changes
in
government
and
regulatory policy
The risk of failure to anticipate
or
influence
changes
in
governmental and regulatory
environment which may impact
our customers and the viability
or profitability of our business.
Our health insurance, provision
and aged care businesses are
subject
to
government
and
regulatory
policy,
including
insurance conduct rules, minimum
wage
requirements,
prudential
requirements,
changes
to
tax
regimes and the interpretation of
existing
tax
practices,
pricing
controls in some of our health
insurance businesses and clinical
care requirements for our provision
and aged care businesses.
The significant governmental and
regulatory
responses
to
the
pandemic have shown that future
legislation,
regulations
and
government
funding
decisions
could have a material impact on
the Group. Any measures put in
place may improve or reduce the
attractiveness and affordability of
private health insurance.
All our markets have defined key
activities to make sure we can
continue to monitor and assess
the strategic implications on our
businesses of any future changes
in
policy
or
regulation,
and
advocate for appropriate change
in these areas.
Strategic Report
For the year ended 31 December 2022
19
Social
licence
to
operate
The
risk
that
reputational
damage
could
impact
our
social licence to operate and
therefore our ability to achieve
our strategic objectives.
Like many global companies, we
face
an
increased
risk
of
stakeholder activism and greater
scrutiny of our record as a socially
responsible company on topics
such
as
the
environment
and
climate change and other issues
which can be interpreted as having
a
‘ethical’
dimension
including
executive and/or low pay, Inclusion
and
diversity,
treatment
of
suppliers, governance, responsible
investment.
Adverse
comments
and unfavourable media coverage
can impact Bupa’s reputation.
Our
reputation
can
also
be
impacted by adverse operational
issues such as cyber attacks.
In order to ensure that issues in
one business or Market Unit do
not spread and impact the trust in
our brand in another, contagion
risk remains prominent in our
operational and reputational risk
management agenda with a focus
on resolving and learning from
issues faced.
With
the
launch
of
our
new
sustainability strategy we have
increased
our
focus
on
management of sustainability and
ESG risks.
Strategic
workforce risks
Risks
associated
with
the
resilience of our own people,
particularly as a result of the
pandemic, including safety and
wellbeing and capacity, which
impact
on
our
employee’s
ability
to
deliver
for
the
customer. This also includes
strategic risks associated with
workforce availability.
Our front-line staff, in particular our
clinical staff, have been under
significant pressure throughout the
crisis and there is a risk of staff
fatigue and burnout.
In many markets we continue to
see
strategic
challenges
associated
with
workforce
availability, exacerbated by cost of
living
challenges,
which
may
impact
our
ability
to
deliver
services.
Considerable work has been done
to
address
the
people
risks
associated with COVID-19 and to
utilise learnings to enhance our
readiness for future pandemics.
This has been led by the People
Function with the support of all
functions and businesses.
Workforce availability remains a
key
area
of
focus
for
senior
management
with
a
range
of
activities underway in each market
to address challenges.
Technology
innovation
and
resilience
including
information
security
The risk of failure to anticipate
and/or respond to changing
expectations
in
relation
to
information
technology
and
resilience which could impact
the viability or profitability of
the business.
Changing consumer expectations/
behaviors with higher expectations
for
technological
solutions
to
improve interactions and the need
for
businesses
to
ensure
appropriate
IT
capabilities
and
operational resilience to deliver for
customers.
Customers looked towards digital
offerings during the pandemic and
where these have been available,
they have been well received. This
has also helped demonstrate value
in digital insurance offerings in a
period where people could not
claim for physical procedures.
Operational resilience capabilities
tested around the Group during
the crisis and generally found to
be performing well.
We
significantly
increased
our
digital
offerings
for
customers
during the pandemic and this will
continue to remain an area of
focus in the future.
Strategic Report
For the year ended 31 December 2022
20
Economic
conditions
and
affordability
The
risk
that
depressed
economic
conditions
further
exacerbate existing challenges
around
affordability
for
customers
with
reduced
spending power which could
impact
the
profitability
or
viability of the business.
The macroeconomic environment
is challenging in most markets,
compounded by COVID-19. It is
uncertain how severe the impacts
will be and how long they will last
but any reduction in consumer or
government spending may impact
our businesses. In many markets
we
are
seeing
heightened
inflationary pressures.
Weakened
economic
environments are also likely to
compound the existing affordability
challenges in health insurance as
premiums rise, driven by high
medical and wage inflation.
We regularly review our products
and offerings to ensure that we
continue to provide value to our
customers despite the economic
challenges
and
affordability
constraints.
Transformation
execution risks
The
risks
associated
with
failing to deliver effective and
timely
transformation
and
change. This includes the risks
associated with acquisition and
disposal decisions and their
implementation.
Our new strategy is focused on
addressing customer expectations
as they change.
All Market Units have a range of
transformation activities underway.
Transformation
and
strategy
execution are a key focus of
senior management.
Appropriate governance structures
are
in
place
to
monitor
the
transformation activities underway.
We have extensive governance
mechanisms in place in regards to
future
acquisition
including
conducting
post
acquisition
reviews
and
implementing
learnings into future acquisitions.
Geopolitical
uncertainty
and
supply
chain
disruption
The
risks
associated
with
geopolitical
uncertainty
and
increasing nationalistic policies
across our businesses and, in
particular, the impact of this on
supply chains.
This has been an emerging trend
for some time but was exacerbated
by the pandemic.
We are also seeing impacts as a
result of Brexit.
While
Bupa
does
not
have
businesses in either Ukraine or
Russia,
the
global
macro-
economic
risks
and
human
consequences of the conflict are
uncertain and we will continue to
monitor any potential impacts on
Bupa’s businesses.
We have heightened our supplier
monitoring,
management
and
communications to help minimise
disruption.
For key product lines, we have
built up Bupa owned or controlled
stocks to minimise supply chain
delays
and
avoid
supply
shortages.
Data
The risks associated with the
ownership,
use
and
governance
of
data
which
could impact on the delivery of
the Group Strategy.
Data is fundamental to the delivery
of the Group strategy and will
continue to remain a key area of
focus for some time.
We have a range of initiatives and
programmes in place across the
Group focused on the use and
governance of data.
There are further risks which do not feature on the list of most significant risks currently facing Bupa but which always remain a
priority for management given our business model. These are detailed in the table below.
Strategic Report
For the year ended 31 December 2022
21
Risk
Description
Comment and outlook
Mitigating actions
Liquidity risk
The
risk
that
we
hold
insufficient financial resources
to enable us to meet our
obligations as they fall due or
to take advantage of potential
opportunities, or of being able
to secure such resources only
at excessive cost, resulting in
adverse impacts.
Liquidity risk is addressed not
through capital but by holding
liquid assets and maintaining
appropriate controls.
Policyholder
liabilities
are
predominantly backed by liquid
assets, so our liquidity risk
exposure primarily relates to
the funding risk associated with
borrowings.
This is mitigated by the Treasury
function
actively
managing
borrowings, for which the amount
and timing of outflows are known,
and by maintaining a portion of
the bank facility undrawn.
We
continue
to
monitor
the
markets
to
ensure
that
we
appropriately fund the Group.
Financial risks associated with climate change
We have integrated climate risk management into our existing Group-wide Risk Management Framework (RMF) which sets out
how we identify, assess, manage and report on risks. We will continue to ensure that climate-related risks are considered
appropriately throughout our governance arrangements, including the policy framework and management committees’
responsibilities. We also continue to reflect on changes in regulatory expectations (e.g., from the Prudential Regulation
Authority, PRA) whilst embedding climate risk through the RMF.
As a result the financial risks from climate change do not appear in our principle risks above but the table below does show how
the key themes are impacted.
Transition:
Policy & Legal
Changes in laws and
regulation
to
stimulate
transition
to
low
carbon
economy
Changes
in
government
and
regulatory policy
We must continue to prepare for, and
then
comply
with,
emerging
regulations (primarily driven through
our insurance business but becoming
increasingly
relevant
for
all
businesses globally). As such, there
is a risk of fines, penalties, and
litigation in the event of regulatory
non-compliance, which could also
result in reputational damage.
Our
Horizon
Scanning
process
continues
to
identify
relevant
legislative and regulatory changes
across a broad spectrum of topics,
including consideration of ESG-
related (including climate change)
developments.
The
Sustainability
Disclosure
Working
Group
(a
Group-level,
cross-functional
working
group)
continues
to
develop
Bupa’s
approach to sustainability-related
disclosures
e.g.,
Taskforce
on
Climate-related
Financial
Disclosures.
Transition:
Reputation
Changes
in
customer sentiment,
and
increased
scrutiny
from
stakeholders
(e.g.,
activists)
Social license to operate
Stakeholder expectations on all ESG
related
areas,
including
climate
change, are increasing. As such,
there is a risk of reputational damage
and loss of trust in our brand –
across the Group – occurring as a
result of not taking appropriate action
to
meet
those
expectations,
not
meeting
commitments,
or
by
"greenwashing".
The
sustainability
strategy
launched
during
COP
27,
focused on building a healthier
future for people and planet.
Engagement in partnerships with
various networks and coalitions
to
help
drive
systemic,
sustainable change in healthcare
through
collaboration
and
innovation (e.g., the Climate and
Health Coalition).
Risk drivers
Relevant
principal
risk
and
potential impact
Short
term
15
Mediu
m term
Long
term
Mitigating actions
Strategic Report
For the year ended 31 December 2022
22
15
Short-term (1-3 years). Medium-term (3-5 years). Long-term (5+ years).
Transition:
Market
Changes
in
behaviour
of
customers,
investors,
and
the
prices
of
financial
assets
and
commodities
Property
Increased severity, frequency, and
variability in weather patterns may
result
in
decreases
in
property
valuations, and additional costs and
capital required to adapt to weather
events and insure our premises (e.g.,
care homes & retirement villages and
hospitals in aged care and health
provision business, respectively) are
as resilient as possible.
We continue to perform a range
of climate-related stress testing
to explore possible impacts to
property valuations (which are
not
currently
believed
to
be
material to our business).
Geographical
spread
of
properties
helps
to
diversify
exposure.
We are working with a specialist
consultancy to develop facilities-
related decarbonisation plan for
2023 and beyond.
Credit spreads and counterparty
default
Our investment portfolio is exposed
to
potential
adverse
valuation
impacts driven by both transition and
physical
risk
exposures
in
the
companies in when we invest.
We are reducing the emissions
profile of our investment portfolio
in
line
with
our
Net
Zero
ambition, using climate scenario
analysis
to
inform
our
understanding of exposures in
the portfolio.
Economic
conditions
and
affordability
Our
customers
(corporate
and/or
personal) will likely be affected by
climate
change,
which
could
negatively
impact
their
financial
resources. This could result in lower
revenues for Bupa (e.g., due to
increased
lapses
of
insurance
policies).
We regularly review our products
and offerings to ensure that we
continue to provide value to our
customers despite the economic
challenges.
Risk drivers
Relevant
principal
risk
and
potential impact
Short
term
15
Mediu
m term
Long
term
Mitigating actions
Strategic Report
For the year ended 31 December 2022
23
Physical: Acute
Increasing severity
of extreme
weather events
(e.g., heatwave,
flooding)
Operational
Climate change may increasingly
cause operational disruption, which
could compromise Bupa’s ability to
deliver products and services safely
to
customers,
patients,
and
residents; the health and safety of
Bupa’s
people
could
also
be
impacted.
The operational resilience
framework takes into account
extreme weather events.
The Climate-related Guidance
Working Group has published its
Care Home Heatwave Guide in
2022. This guide represents the
first of a collaborative, cross
functional, global effort to distil
the real-world experiences and
expertise of our teams in our
MUs into central guidance, to
share best practice
internationally.
Physical:
Chronic
Gradual, long-term
changes
in
precipitation (e.g.,
rain), temperature,
and sea-level rise
Insurance
Changes in global temperatures and
weather
patterns
will
affect
the
healthcare needs of our customers
and may lead to increased claims
costs or shifts in the treatments
required.
Our insurance business aside, this
could
also
impact
our
health
provision and aged care businesses
(e.g., the elderly population may be
more susceptible to increased heat).
We know that people will be
more unwell in a world that
experiences
increased
climate
change. The short-tailed nature
of our products allows us to
respond
through
pricing,
although this can be limited by
pricing controls in some markets.
The affordability impacts from
price increases would need to be
carefully considered.
To develop our understanding of
the potential impacts arising from
the
relationship
between
planetary and human health (in
terms
of
both
risks
and
opportunities),
Bupa
will
be
performing
an
exploratory
climate-related
health
impact
scenario in 2023.
Risk drivers
Relevant
principal
risk
and
potential impact
Short
term
15
Mediu
m term
Long
term
Mitigating actions
We have incorporated the financial risks from climate change into our wider stress testing programme. The results of our
scenario analysis carried out to date suggest that our strategy is resilient to the financial risks from climate change. We continue
to evolve and mature our climate scenario analysis along with our disclosure approach and scan for developments and
improvements in scenario methodology and data.
The following section sets out some of the key highlights from tests performed to date.
Climate Biennial Exploratory Scenario (CBES) scenarios
- Bupa has utilised two scenarios from the PRA’s Climate Biennial
Exploratory Scenario (although Bupa was not formally invited to participate) to help explore the possible impacts to the Group
balance sheet from climate change over a 30-year horizon: ‘Late Action’: a ~2
o
C, disorderly transition scenario, achieving net
zero by 2050 (comparable to the Network for Greening the Finance System (NGFS) Disorderly scenario), and ‘No Additional
Action’: a 4.1
o
C scenario with high physical risk due to a lack of transition (comparable to the NGFS Hot House World and the
Representative Scenario Pathway (RCP) 8.5 scenarios). We have tailored some of the provided property valuation shock
parameters to ensure relevance for our specialist property portfolio (e.g. care homes, retirement villages, and hospitals) based
on the impacts of increased physical risk (e.g., floods), across multiple territories, using publicly available third-party data
sources where available, and additional internal judgments. The scenarios also include a shock for property adaptation costs
and increased insurance premiums across the entire property portfolio, as well as an assessment of the impacts on our
investment portfolio and the value of Bupa’s debt.
Strategic Report
For the year ended 31 December 2022
24
Other scenarios
- Our 2022 Stress and Scenario Testing programme helped us to better understand localised climate change
risks as well as a range of potential impacts which could be driven by climate change (although not exclusively) over the
following 12-month period. For example: Global scenarios: impacts of increased inflation on insurance claims and expenses
across all businesses (possibly a potential outcome of an energy price shock and/or carbon pricing). Local (i.e., Business Unit)
scenarios: impacts of strategic workforce risks (including workforce shortages, increased attrition, and higher staff costs), supply
chain disruption risk, and regulatory changes.
In 2023, new analysis will be piloted to help provide insights into how climate change could affect the prevalence and severity of
certain health conditions, and how this might impact the frequency and average costs of health insurance claims (and therefore
profitability). The analysis could help us understand how Bupa’s health insurance offering might need to adapt to meet changing
customer needs and identify new opportunities.
On behalf of the Board
James Lenton
Director
1 March 2023
Strategic Report
For the year ended 31 December 2022
25
Governance
The Company adheres to the policies and procedures adopted by the Bupa Group.
Bupa complies with the UK Corporate Governance Code 2018 (Code) and ensures that its governance responsibilities under
the Code are enacted effectively with relevant provisions and principles being applied throughout the Bupa Group.
In addition, the Company complies with the Enterprise Policies issued by Bupa. These policies are designed to mitigate risks,
both internally and externally, and to ensure that the Company operates within the risk appetite set by the Bupa Board.
System of governance
Our system of governance includes a Risk Management Framework (RMF) implemented using a ‘three lines’ approach, which
is overseen by the Bupa Board and its Committees. In addition, the External Auditor provides further assurance to the Bupa
Audit Committee and the Bupa Board in relation to the Group’s financial statements.
The RMF seeks to ensure that:
•
Appropriate governance arrangements are in place
•
There are clear and established risk appetites in key areas of risk and opportunity within which the business operates
•
Risk management processes are in place to identify, assess, monitor, manage and report risks
•
Effective controls are implemented and monitored to reduce risk exposure
•
Documentation is maintained for key processes, key controls and responsibilities
•
Risk management information is used to make effective decisions across the business.
This includes identifying emerging risks and climate-related risks and understanding their potential consequences.
Three lines model
First-line accountability
All our people are responsible for managing risk and ensuring compliance with relevant laws, regulation, best practice and Bupa
policies and processes within their role. This ranges from care home employees following procedures to keep our residents safe
to senior managers ensuring that they have appropriate and up-to-date policies and procedures in place in their areas and that
their people are following these and reporting any breaches or incidents quickly and fully. During 2022, we began a process to
enhance first-line accountability through the establishment of a group-wide Integrated Management System (IMS), which aims
to link policies and procedures, underlying processes and staff roles in a way that drives standardisation and reinforces
accountabilities.
To help our people understand their responsibilities, we have the Bupa Code (which sets out how we expect our people to
behave every day), mandatory training on key topics, and role-specific training for frontline people. We also undertake regular
internal communications campaigns on key issues to maintain awareness and share relevant information. Each Business Unit
sets target risk outcomes for the year, which are reviewed and agreed with Market Unit management and Group management
risk committees. These are subsequently monitored by local management and the outcomes reported to the Bupa Risk
Committee. Enterprise risk policy owners in the first line of defence carry out continuous monitoring of compliance with our
enterprise risk policies and their assessment is challenged by the second line (risk, compliance and clinical governance) and
third line (internal audit).
Second-line assurance – Risk, compliance and clinical governance
Bupa's Chief Risk Officer (CRO) leads the Risk Function and reports to the Bupa Group CEO. The CRO has unfettered access
to Bupa's Chairman and to the Chair of Bupa's Risk Committee, which has responsibility for approving the appointment (and
removal) of the CRO. The Risk Function operates across the Group and each Market Unit has a chief risk officer. In 2022 the
Clinical Governance Function moved from the leadership of Bupa’s Chief Medical Officer (CMO) to report to the CRO to better
align with the Bupa Group strategy and the links between our insurance and provision businesses.
The Group Risk Function is responsible for the consolidation of risks across Bupa and reporting them to management through
the management-level Bupa Enterprise Risk Committee, and to the Bupa Risk Committee. It has established the principles and
framework that support the processes and procedures to identify, assess, manage, monitor and report risks to which the Group
is, or might be, exposed.
The function provides independent oversight and challenge of risk governance and risk management practices conducted by
the first line, and forms an independent view on the quality and sufficiency of the business’s risk management activities and
internal control environment. It reports on the quality and sufficiency of these first-line activities to the Bupa Risk Committee.
Governance
For the year ended 31 December 2022
26
This includes providing a second-line opinion on the effectiveness of internal controls and the management of risks within
appetite, which forms part of an integrated Internal Control and Risk Management Report that sets out the opinion of all three
lines.
Details of the principal and other significant risks to the Group and our progress in building a strong risk management culture
are set out in the Risk section on page 17.
Third-line assurance – Group Internal Audit
Bupa's Chief Audit Officer (CAO) leads the Group Internal Audit (GIA) Function and provides independent assurance to the
Bupa Audit Committee by examining, evaluating and reporting on the adequacy and effectiveness of Bupa’s governance, risk
management and internal control processes in relation to Bupa’s objectives and risk appetite. The CAO reports to the Bupa
Audit Committee, which has responsibility for approving their appointment (and removal), and secondarily reports to the Group
CEO on day-to-day operations.
An Internal Audit Charter is in place which sets out the Function’s role, authority and independence. GIA operates in accordance
with the Global Institute of Internal Auditors’ international standards and the UK Chartered Institute of Internal Auditors Financial
Services Code (FS Code). The Internal Audit Charter, which is reviewed annually, was approved by the Bupa Audit Committee
in September 2022 and is available on bupa.com.
GIA undertakes risk-based assurance work in accordance with an assurance plan approved and monitored by the Bupa Audit
Committee. GIA’s assurance plan is aligned with the planned work of the Group Risk Function to enable collaboration and
coordination and improve coverage and efficiency of assurance activities where appropriate.
In 2022, global cross-geographic and functional practice groups continued to operate to coordinate and support the
implementation of assurance work and to share information about audit outcomes, insights and actions. Global audits were
carried out in relation to risk management of third parties with access to Bupa data, clinical governance, and payment
compliance industry data security standards. A number of key risk themes were also reviewed across each audit including the
extent to which:
•
The three lines and risk culture are embedded and contributing towards an effective system of risk management and
internal control
•
Data is used to drive decisions and handled appropriately
•
Employee responsibilities are clear and understood, and key people risks are appropriately recognised and
addressed
•
‘Change activity’ is governed, managed and executed effectively, enabling Bupa to achieve its strategic intentions
•
Information security risks are adequately controlled.
The CAO regularly reports to the Bupa Audit Committee on GIA’s activities as well as management’s progress in addressing
findings from its assurance work, and all GIA reports are made available to Bupa Audit Committee members. The CAO regularly
attends Bupa Risk Committee meetings, and other executive committee fora, including the Bupa CEC, to ensure that GIA’s
work is adequately informed, supported and communicated.
GIA maintains a quality assurance and improvement programme which includes continuous external quality assurance activity
undertaken by a third party; internal quality control monitoring; and annual self-evaluation against the UK Internal Audit Code of
Practice and FS Code. Quality assurance and improvement feedback is also gathered via stakeholder and employee
engagement surveys. During 2022 an external quality assessment of GIA was undertaken by an external assessor and its
findings were discussed at a meeting of the Bupa Audit Committee in January 2023. See the Bupa Audit Committee’s report on
page 31 for more information.
GIA’s assurance plan for 2023 is aligned with Bupa’s strategy and areas of key risk arising from the nature and breadth of
Bupa’s businesses within the context of the current macroeconomic environment. Key areas of focus of the 2023 assurance
plan include: key components of the Group’s strategic framework and transformation plans; information technology and data;
risk management and control (including implementation of the IMS); workforce management; legal and regulatory compliance;
clinical governance; and sustainability.
Further details of the activities of the Bupa Audit Committee in relation to GIA are set out in the Bupa Audit Committee report on
page 35.
Integrated reporting
An integrated report, which provides an overview and assessment of the Group’s systems of risk management and internal
control in 2022, combining inputs from each of Bupa’s three lines, was presented to a joint meeting of Bupa's Audit and Risk
Governance
For the year ended 31 December 2022
27
Committees in February 2023. The report enables the Board to assess the Group’s systems of risk management and control in
a comprehensive and consistent way, and to consider relative strengths, weaknesses and future improvement opportunities.
The report also provides the basis on which the Board reports on Bupa’s compliance with associated aspects of the Code.
Whistleblowing
We foster an open and honest culture which includes encouraging and enabling our people and third parties to raise concerns
of any malpractice or wrongdoing at Bupa in a secure and anonymous way in cases where reporting directly to a manager is
not appropriate or the concern has not been fully addressed. We run regular internal campaigns to raise awareness of Speak
Up, Bupa’s internal whistleblowing process, and provide feedback on the actions taken in response to concerns raised. All
employees complete mandatory annual training and there are Speak Up officers for each business. We use our engagement
survey to test the level of confidence our people have in Speak Up, and invite feedback. Bupa's Audit Committee annually
reviews the Speak Up Policy to ensure that it is robust and operating effectively and recommends it to the Bupa Board for
approval. The Bupa Board receives regular updates on issues reported through Speak Up during the year and on investigations
and actions taken.
External Auditor
External audit provides independent assurance to the Company concerning the audited financial information in this Annual
Report and Accounts. PricewaterhouseCoopers LLP (PwC) is our current External Auditor. The lead audit partner, Jo Leeson,
attends all meetings of Bupa's Audit Committee and Risk Committee and provides regular reports to Bupa Audit Committee.
PwC has internal procedures and controls in place to follow the Ethical Standards issued by the FRC for auditors to ensure that
it remains independent. There are no contractual obligations restricting the Group’s choice of External Auditor and there is no
limitation of liability in relation to statutory audit activities in the terms of PwC’s appointment as External Auditor of the Company.
Bupa has an Audit and Non-Audit Services Policy, setting out the circumstances under which the Group’s External Auditor can
be engaged for non-audit services, recruitment restrictions for candidates with employment experience with the External Auditor
and monitoring and reporting requirements for Bupa employees, contractors and temporary staff with close family members
who are employed by the External Auditor. The policy is in line with the FRC’s Revised Ethical Standard 2019 on the integrity,
objectivity and independence of external auditors. It sets out certain pre-approved services, permitted services requiring
approval and prohibits all other services. Non-audit services are generally capped at 70% of the average Group statutory audit
fees paid over the preceding three years. In practice, only pre-approved services or permitted services are allowed in
exceptional circumstances. Depending on the value, permitted services must be approved in advance by the Group
Performance and Finance Transformation Director, Group CFO or Chair of the Bupa Audit Committee.
Information on the Bupa Audit Committee’s interaction with the External Auditor during the year can be found in the Audit
Committee report on page 36.
Our people
Culture and our people
The Bupa Board is responsible for ensuring that our culture is aligned with Bupa’s purpose, values and strategy at all levels of
the organisation. In order to do our best for our customers, we need to take care of our people, and this will lead to strong and
sustainable performance to enable us to deliver our purpose.
The Bupa Board monitors culture in a number of ways, including direct workforce engagement (described further below) and
regular people-related items on its agenda including:
▪
Measuring our people’s engagement level and how they embody Bupa’s values through our People Pulse survey tool
and considering recommendations to management in response to the survey results
▪
Considering bi-annually the level of, and themes arising from, reports received through our Speak Up whistleblowing
process
▪
Leadership development, talent and succession, inclusion and diversity, and employee wellbeing.
The Bupa Board has also received specific updates on culture and initiatives helping drive change in Bupa’s culture to more
agile ways of working to deliver on the 3x6 strategy. In 2023, the Board will receive regular updates on Changemaker, a global
initiative which is being established to create more capacity for Bupa to both run and change.
Listening to and engaging our people
Listening to the views of our people and engaging with them on matters important to them is key to our culture and values. The
results of our People Pulse surveys are considered by the Bupa Board and have led to a number of initiatives, including the
introduction of Viva, a project to provide, for the first time in our history, healthcare benefits to all of Bupa’s employees globally
by the end of 2023, to support their health and wellbeing.
Governance
For the year ended 31 December 2022
28
We want our people to see the Bupa Board as accessible and approachable. With the travel restrictions in place during the
COVID-19 pandemic having been largely relaxed, we have resumed our programme of arranging site visits for Bupa Directors
to different parts of the Bupa Group. These visits provide an invaluable opportunity for our people to ask questions directly to
the Bupa Board and for the Bupa Directors to gain an insight into the issues important to our people in various parts of the
business. This helps enhance decision-making and consideration of the longer-term impact of the Bupa Board’s decisions on
our people.
This year, a group of our Bupa NEDs visited our Australian business where, as well as meeting with executives to gain deeper
insights into the business, they attended a number of customer-facing sites including a dental clinic, aged care facility and a
hospital where they were able to talk to frontline staff. The Bupa Chairman and Group CEO visited our Polish colleagues to see
first hand their efforts to provide healthcare support for Ukrainian refugees.
In December 2021, the Bupa Nomination & Governance Committee agreed an enhanced approach to engaging with the
workforce and selected Roger Davis, Michael Hawker and Matías Rodríguez Inciarte as the designated Bupa Directors to meet
regularly with representatives of our workforce and to participate in workforce events in the UK, Australia and New Zealand, and
Spain, respectively. A programme of events for 2022 was developed for each Bupa Director and the designated Bupa Directors
have provided quarterly updates to the Bupa Board on their activities during the year. We believe that this approach is working
well and there has been strong alignment of the insights reported through these processes with reports to the Bupa Board from
other channels.
In the UK, the Bupa Chairman held a roadshow, visiting a dental practice and a number of care homes and has committed to
attending regular employee drop-in sessions in 2023 on a variety of diversity and inclusion issues. Employees had welcomed
the opportunity to find out more about the Bupa Board, the Bupa Chairman and Bupa’s response to the crisis in Ukraine. Staff
appeared highly engaged and provided feedback on improvements to technology and use of data that would further enhance
their working practices and performance but also that the increasing digitalisation of the care services business in line with the
Bupa Group’s strategy was enhancing engagement.
Matías Rodríguez Inciarte has discussed employee retention issues, the People Pulse results for Spain and other parts of the
ELA Market Unit, and Speak Up with local management. He visited the Spanish dental business, a Spanish care home and
spent time with managers responsible for customer relationships. Feedback was very positive with the continued impact of
COVID-19 being felt in the care homes and work/life balance considered an issue by some staff. However, local management
were aware of this and considering what action could be taken.
Mike Hawker holds regular meetings with the Australian People team and met with staff from the Australian Health Insurance
business to discuss their background, working culture and the impact of recent changes in the business. Mike also visited an
optical/auditory store and a dental clinic in Australia and care homes in New Zealand. Feedback on Bupa’s culture and the local
leadership team was very positive with improvement requests relating to technology, data and pace of change.
The Bupa Board has found this feedback extremely useful and has provided feedback to local management teams where
relevant.
Senior succession and talent review
During the year, the Bupa Board considered talent reviews of senior executives in the BGUK and ELA Market Units in addition
to its regular review of senior talent below CEC level and succession plans for each CEC member. The reviews considered the
quality of our senior leadership talent pool to deliver the Bupa Group’s strategy and transformation. It also takes diversity and
inclusion into account with 43% of identified future leaders being female.
Complying with the UK Corporate Governance Code 2018
As the Company’s Parent chooses to apply the UK Corporate Governance Code (Code) to the extent applicable to a company
without shares, the Company also chooses to apply certain Principles of the Code which it believes are appropriate for a large,
wholly owned subsidiary company with a sole corporate shareholder and debt investors. The Company does not apply the
following Principles of the Code as they are applied by the Company’s Parent by the Bupa Board and its Committees and are
not considered relevant to the Company as a subsidiary:
Section 2 – Division of Responsibilities: Principles F-H
Section 3 – Composition, Succession and Evaluation: Principles J and L
Section 5 – Remuneration: Principles P-R
Throughout 2022, we applied the remaining Principles and complied with all the related provisions in the Code, to the extent
they are applicable to a wholly owned subsidiary company. The Code is available on frc.org.uk.
Governance
For the year ended 31 December 2022
29
The table below sets out how we have complied with the relevant Principles of the Code during 2022.
Principle
How we apply the principle
1. Board leadership and company purpose
A. The board’s role
A successful company is led by an effective
and entrepreneurial board, whose role is to
promote the long-term sustainable success of
the
company,
generating
value
for
shareholders and contributing to wider society.
The Board is responsible for the long-term sustainable success of Bupa for
the benefit of its customers and wider stakeholders, now and in the future.
The Board works to achieve this by making decisions in line with Bupa’s
strategy within a prudent and effective governance structure, using a three
lines model.
The Section 172 statement on page 12 provides examples of the types of
decisions made by the Board during the year and how they relate to the
Company’s key stakeholders.
B. Setting purpose, values and strategy
The board should establish the company’s
purpose, values and strategy, and satisfy itself
that these and its culture are aligned. All
directors must act with integrity, lead by
example and promote the desired culture.
The Bupa Board sets the values, strategy and culture for the Bupa Group in
line with its recently updated purpose of ‘Helping people live longer, healthier,
happier lives and making a better world’. The Bupa Group’s refreshed values
and new 3x6 strategy are driven from this purpose. The Board assists in the
execution of Bupa’s strategy through its decision-making. The Directors take
decisions in line with Bupa’s values and culture and ensure they make
informed decisions on the areas within their remit.
C. Resourcing and risk management
The board should ensure that the necessary
resources are in place for the company to meet
its
objectives
and
measure
performance
against them. The board should also establish
a framework of prudent and effective controls,
which
enable
risk
to
be
assessed
and
managed.
The Bupa Board annually approves the Bupa Group’s annual budget and
base operating plan for the following three years ensuring that sufficient
resources are available to achieve the Company’s objectives, and receives
regular management information on progress against the annual operating
plan and a quarterly rolling forecast.
The Bupa Board retains ultimate responsibility for risk management and
internal controls with detailed oversight carried out by the Bupa Audit
Committee (which has been appointed to fulfil the role of the Company’s
audit committee for the purposes of DTR 7.1 and is comprised solely of
independent non-executive directors) and Bupa Risk Committee.
On the recommendation of the Bupa Risk Committee, the Bupa Board sets
the Group’s risk appetite and RMF. These set out the principal risks facing
the Group and the nature and extent of risk the Bupa Board is willing for the
Group to take in order to achieve the Group’s strategic objectives.
An integrated report on internal control and risk management giving the
opinions of each of the three lines is considered by a joint meeting of the
Bupa Risk and Audit Committees prior to the Board approving the statement
on internal control and risk management in each Annual Report.
D. Stakeholder engagement
In
order
for
the
company
to
meet
its
responsibilities
to
shareholders
and
stakeholders,
the
board
should
ensure
effective engagement with, and encourage
participation from, these parties.
We are a customer-focused business reliant on our people to deliver great
service. The Directors consider the impact of decisions on relevant
stakeholders, as described further in the Section 172 statement. Across the
Group, there is an active programme of engagement with our key
stakeholders,
including
our
customers,
our
people,
regulators
and
bondholders. Briefing calls with our bondholders on the Company’s half year
results and Annual Report are held, together with an annual roadshow. Other
significant developments are communicated via regulatory announcements,
press releases and Bupa’s website bupa.com.
Governance
For the year ended 31 December 2022
30
E. Workforce policies
The
board
should
ensure
that
workforce
policies and practices are consistent with the
company’s values and support its long-term
sustainable success. The workforce should be
able to raise any matters of concern.
Bupa’s People framework includes ensuring that the Group’s workforce
policies and practices are consistent with our values and support our long-
term sustainable success. The Bupa Board receives regular updates on the
issues reported through Speak Up, and on investigations and actions taken.
The Bupa Audit Committee annually reviews the Speak Up policy to ensure
that it is sufficiently robust and operating effectively.
2. Division of responsibilities
I. The company secretary
The
board,
supported
by
the
company
secretary, should ensure that it has the
policies, processes, information, time and
resources
it
needs
in
order
to
function
effectively and efficiently.
The Bupa Group Company Secretary (who is also the Company’s company
secretary), and his team, advise the Board on company law and corporate
governance matters, including compliance with the Code. He works with the
Directors to ensure that the right matters are escalated to the Board at the
appropriate time and that papers are of a high quality.
He is responsible for the Bupa Group’s Subsidiary Governance Risk Policy,
which sets minimum standards of corporate governance across the Bupa
Group.
3. Composition, succession and evaluation
K. Skills, experience and knowledge
The board and its committees should have a
combination
of
skills,
experience
and
knowledge. Consideration should be given to
the length of service of the board as a whole
and membership regularly refreshed.
In accordance with the relevant Bupa policy, an assessment of the required
skills, experience and knowledge is carried out in order to identify any new
appointment/changes to the composition of the Board. The Bupa Audit
Committee acts as the audit committee of the Company, and the members of
that Committee are recommended by the Bupa Nomination & Governance
Committee to the Bupa Board for approval. See the Bupa Audit Committee
report below for more information.
4. Audit, risk and internal control
M. Financial reporting integrity
The
board
should
establish
formal
and
transparent policies and procedures to ensure
the independence and effectiveness of internal
and external audit functions and satisfy itself
on the integrity of financial and narrative
statements.
The Board delegates detailed oversight of GIA and the External Auditor to the
Bupa Audit Committee, together with oversight of the Group’s system of
internal controls to ensure the integrity of the Group’s full year and half year
results and the Annual Report and Accounts.
On the recommendation of the Bupa Audit Committee, the Board reviewed
and approved the 2022 half year results and the 2022 Annual Report and
Accounts and concluded that Bupa maintained a sound and effective system
of risk management and internal control with some weaknesses in internal
controls, which are being addressed by management.
N. Fair, balanced and understandable
The board should present a fair, balanced and
understandable assessment of the company’s
position and prospects.
The Bupa Audit Committee reviewed the 2022 Annual Report and Accounts
in early 2023 and was satisfied that it presents a fair, balanced and
understandable assessment of the Group’s position and prospects and
reported its findings to the Board.
O. Risk management and internal control
The board should establish procedures to
manage risk, oversee the internal control
framework, and determine the nature and
extent of the principal risks the company is
willing to take in order to achieve its long-term
strategic objectives.
The Bupa Risk and Audit Committees monitor the Group’s risk appetite which
sets out the nature and extent of risk the Board are willing to take and agrees
the principal risks facing the business. A Risk Management Framework is in
place to identify, monitor, manage and assess risk.
Bupa operates a three lines model and the Bupa Risk Committee oversees
the principal risks facing the Group and the processes and plans in place to
mitigate or monitor those risks.
The Bupa Risk and Audit Committees monitor the Group’s risk management
and internal control systems on behalf of the Board on a continuous basis,
including monitoring emerging risks.
Bupa Audit Committee report
The Committee’s role and governance
The principal functions of the Committee are to monitor the integrity of Bupa’s financial statements, the effectiveness of our
internal control systems, and to monitor the effectiveness, performance, objectivity and independence of GIA and the External
Auditor. The Committee also reviews regulatory reporting and external disclosure requirements. A full description of the
Committee’s role is set out in its Terms of Reference which are available on bupa.com.
Governance
For the year ended 31 December 2022
31
The Committee comprises five independent NEDs, all of whom are considered to have recent and relevant financial experience
gained through their executive and non-executive careers. Two of the Committee members are chartered accountants. There
are cross-memberships between the Committee, the Bupa Risk Committee, Bupa Remuneration Committee and the Bupa
Board Sustainability Committee to oversee risk management and internal control, to ensure an integrated approach to risk
management and assurance between Group Risk and GIA, to provide input on the quality of the Group’s financial results to aid
remuneration decisions and to facilitate assurance over the reporting of data on greenhouse gas emissions. The Group CEO,
Group CFO, Group Performance and Finance Transformation Director, CAO, CRO and lead partner of the External Auditor are
routinely invited to attend Committee meetings. The Committee meets at least annually with each of the External Auditor, CAO
and Chief Actuary in the absence of management.
I was appointed Chair of the Committee from 1 May 2022 following Clare Thompson’s retirement from the Board on 30 April
2022. I would like to thank her for her strong leadership of the Committee over the last seven years.
Key activities in 2022
Impairments
The increased global uncertainty, specific development’s in certain geographies and the increasing cost of capital during the
second half of 2022 have increased the sensitivity of past investments to impairment, over which the Committee exercises its
judgement in undertaking goodwill and other asset impairments. Management recognised material impairments across a
number of cash generating units (CGUs) as at 31 December 2022.
Management provided the Committee with increased analysis across relevant market conditions, the key judgements and
assumptions underpinning future cash flow models and enhanced sensitivity analysis.
This information was subject to enhanced scrutiny by the Committee at both the half year 2022, where indicators of potential
impairment were identified (and public disclosure was made of the risks and uncertainties which could over time lead to
impairments being required), and ahead of approval of the 2022 Annual Report. At the half year 2022, the Committee concluded
that no impairments were required; however, the cost of capital increased and specific challenges in certain businesses
developed during the second half of the year resulting in asset impairments for a number of CGUs. Where impairments were
identified for UK Care Services, Bupa Dental Care UK, Bupa Chile and Bupa Villages and Aged Care Australia (BVAC Australia)
the Committee considered the appropriateness of the quantum of those impairments and also the related disclosure within the
Financial Statements.
Insurance claims reserving
Management chose to cease accruals for the Deferred Claims Liability (DCL) provision from Q4 2022 as COVID-19 is no longer
causing significant disruption to the availability of services. The DCL will not be recognised in 2023 following the implementation
of IFRS 17 Insurance Contracts from 1 January 2023.
The Committee considered the Group Chief Actuary's report on the appropriateness of the overall level of insurance reserves,
including the level of prudential margin. In reviewing and approving the insurance reserves, the Committee also took into
consideration the External Auditor’s report to the Committee and agreed that the Group’s overall level of insurance reserves
remained appropriate.
IFRS 17 Insurance Contracts
IFRS 17 Insurance Contracts (IFRS 17) comes into effect for Bupa’s 2023 financial year. During the year the Committee
reviewed the Group’s final IFRS 17 technical accounting policies, material policy application judgements, transition adjustments
to the Group’s 2022 opening reserves under IFRS 17 and the disclosures in the Annual Report regarding the effect of that
transition.
IT general controls
We reported last year on the remediation programme under way to uplift information security and IT general controls. This is an
ongoing process in a fast-evolving area and remains an area of interest to the Committee.
Group Reporting Controls Environment
The Committee considered a review of the Group’s IFRS consolidation and wider production process for the Annual Report and
Accounts, considering the risks across the end-to-end process and the associated first line key control and governance
processes which were in place to support the production of timely, complete, and accurate disclosures.
The Committee was
satisfied with management’s self-assessment that the control environment concerning Group reporting was effective.
For future
Governance
For the year ended 31 December 2022
32
assessments, the Committee requested that additional strategic perspectives be considered in order to pre-empt potential risks
to the process and to identify potential mitigants for such risks.
Assurance over our 2021 GHG Emissions Report
During the year, the Bupa Board Sustainability Committee asked the Committee to oversee the internal and external assurance
over Bupa’s Scope 1, 2 and selected Scope 3 GHG emissions footprint (GHG Emissions Footprint). Having a complete and
accurate baseline GHG Emissions Footprint is important to measure progress in achieving Bupa’s net zero ambition, and
having this data externally assured gives this data additional credibility and provides reassurance to external stakeholders that
they can trust the data we publish. The baseline year is 2019.
In June 2022, the Committee approved the engagement of PwC to carry out limited assurance over the Group’s GHG
Emissions Footprint for 2021 in view of their ability to carry out high-quality assurance and ability to cover Bupa’s complex
geographical presence and mix of business lines. The Committee also received updates on the progress of internal and
external assurance activities covering processes and controls, and the completeness of the GHG Emissions Footprint.
In November 2022, the Committee met jointly with the Bupa Board Sustainability Committee to consider Bupa’s draft 2021 GHG
Emissions Report and PwC’s limited assurance report. The Committee also reviewed and challenged the materiality level and
level of management discretion proposed in a draft GHG emissions recalculation policy at which baseline emissions data would
be recalculated to account for significant events such as large acquisitions or divestments. This policy had been developed in
line with the GHG Protocol published by the World Resources Institute and the World Business Council for Sustainable
Development.
The final 2021 GHG Emissions Report and PwC’s limited assurance report were reviewed by the Committee in December 2022
and the Committee recommended the 2021 GHG Emissions Report to the Bupa Board for approval.
Significant issues and areas of judgement
Key issue
Committee response
Goodwill and intangible assets
Significant levels of goodwill and intangibles
are held in respect of prior acquisitions.
Impairment reviews are inherently complex
and require a high level of judgement to be
applied due to the uncertainty involved in
forecasting future cash flows and judging
the appropriateness of discount rates used
and future growth rates of the respective
businesses. During 2022 global economic
uncertainty, including increases in inflation,
has led to increases in central bank interest
rates and volatility in bond yields. This
increased the sensitivity of past investments
to impairment, over which the Committee
exercises
its
judgement
in
undertaking
goodwill and other asset impairments.
A
number
of
impairments
have
been
recognised as at 31 December 2022 and
therefore
further
judgement
has
been
required in relation to the quantum and
disclosure of those impairments.
The Committee critically reviewed and discussed management’s reports
outlining the key assumptions within impairment assessments for Bupa's most
sensitive CGUs and challenged the results in the light of business performance
and the external environment. The continued recovery from the pandemic for a
number of the Group’s businesses, both during the year and forecast through
the 2022-2024 plan period, has been a key area of focus within management’s
analysis and judgements. Consistent with the prior year, the most sensitive
CGUs continue to be UK Dental, BVAC Australia, Bupa Care Services and
Bupa Chile.
The Committee also considered the appropriateness of disclosures regarding
impairment testing results, the related key assumptions and the headroom
sensitivities. The Committee also received from the External Auditor a report of
their views on the assessments performed by management. The Committee is
satisfied that the assumptions applied were reasonable and the carrying value
of goodwill and other intangible assets is appropriate.
Governance
For the year ended 31 December 2022
33
Insurance reserves
Calculation
of
the
outstanding
claims
provision is based on assumptions including
claims development, margin of prudence,
claims costs inflation, and medical trends
and seasonality, which require a high level
of judgement and actuarial expertise. Bupa
continued
to
hold
additional
insurance
reserves during the year where constructive
obligations relating to the pandemic required
such liabilities to be recognised. Where
these exist, the amount and timing of in-
scope deferred claims that are expected to
rebound continue to be a key judgement.
The Committee considered the appropriateness of the overall level of insurance
reserves held at key reporting dates. The Committee received a report from the
Chief Actuary setting out estimates of the IFRS insurance reserves, including
the consolidated margin of prudence and the key assumptions underpinning the
deferred claims provision in Australia, as well as the result of the annual review
of compliance with Bupa’s Claims Reserving and Liability Adequacy Standards.
The Committee also took into consideration the External Auditor’s report to the
Committee.
Property valuations
Bupa has a significant portfolio of care
homes, hospital and office properties which
are revalued to fair value on a periodic
basis, with external valuations undertaken at
least triennially. Bupa also has a portfolio of
investment properties, primarily retirement
villages in New Zealand.
In valuing care home property, a judgement
is made on the highest and best use of the
property.
The
underlying
assumptions
involved
in
the
valuation
estimates,
including profitability, occupancy levels and
capitalisation rates and discount rates, are
subject to a high level of judgement.
The Committee received the results from the external valuations undertaken as
part of the triennial property review, primarily across Australia, New Zealand
and UK properties, and also Directors’ valuations performed in other Business
Units.
The Committee also reviewed reporting from the External Auditor addressing
the
valuations
to
assess
their
reasonableness
and
considered
the
appropriateness of disclosures made.
The Committee is satisfied that the revaluation exercise undertaken by
management is sufficiently robust and that the resultant movements in fair value
across the Group’s property portfolio is appropriate.
Pension assets and liabilities
Bupa’s principal defined benefit scheme in
the UK is The Bupa Pension Scheme.
Significant
judgement
is
exercised
in
determining the actuarial assumptions used
in valuing the pension obligations, which
include the discount rate, rates of inflation,
salary
increases
and
mortality.
This
judgement has heightened during the year
as a result of increased volatility across
these key assumptions.
The Committee reviewed the assumptions used in the valuation of the related
pension assets and liabilities performed by the independent scheme actuary at
both the half year and full year. The Committee also took into consideration the
External Auditor's report to the Committee on the assumptions used in the
valuation of the pension liabilities.
The Committee concluded that managements IAS 19 valuation exercise was
sufficiently robust and prudent, with appropriate disclosure made within the
financial statements.
Provisions and contingent liabilities
The Group has circumstances arising over
the ordinary course of business, including
losses which might arise from litigation,
disputes, interpretation of tax law or local
regulator
interactions.
Judgement
is
exercised
in
determining
whether
the
circumstances
should
give
rise
to
the
recognition
of
provisions
or
contingent
liabilities.
In the case of material contingent liabilities
further judgement is required in arriving at
appropriate disclosure of such matters. A
material
contingent
liability
has
been
disclosed in relation to a Chilean subsidiary,
Isapre Cruz Blanca.
The Committee considered potential material contingent liabilities across the
Bupa Group through their review of the key accounting and tax judgements
presented by management.
In relation to Isapre Cruz Blanca the Committee were provided with extensive
additional information and analysis by management. The Committee considered
and challenged management’s technical accounting assessment of the IAS 37
provision criteria, in particular the judgement that a reliable estimate could not
be formed, and therefore no provision recognised, as at 31 December 2022. In
addition, the Committee considered the disclosure made within the financial
statements for appropriateness and completeness.
The Committee also reviewed reporting from the External Auditor regarding the
IAS 37 accounting judgements and Bupa’s contingent liability disclosures.
The Committee concluded that both management’s assessment that no
provision could be reliably estimated as at 31 December 2022 and the related
contingent liability disclosure were appropriate.
Governance
For the year ended 31 December 2022
34
Fair, balanced and understandable
In assessing whether the 2022 Annual Report was fair, balanced and understandable, the Committee found as follows:
◦
The narrative reporting in the Strategic Report is consistent with the financial statements, providing challenge and
feedback throughout the compilation of the 2022 Annual Report
◦
The key judgements referred to in the narrative reporting and the significant issues reported in this Audit Committee
report are consistent with the financial statements
◦
Statutory and alternative performance measures, such as underlying profit, have been given equal prominence and
are clearly explained
◦
Key performance indicators reflect those used to measure business performance, and management are able to
explain their relevance in assessing the results
◦
Clear, simple explanations are given of the business model, Bupa’s strategy and accounting policies
◦
Key messages are clearly highlighted with consistent wording throughout the 2022 Annual Report
◦
The layout and presentation are clear with appropriate language used throughout.
Going concern and longer-term viability
Management presented their going concern assessment to the Committee ahead of the Board’s approval of the Group’s 2022
half year results and 2022 Annual Report. This included analysis of the impact of a number of stress scenarios on the Group’s
base plan for the period 2023-2025 and their impact on Bupa’s solvency, liquidity, borrowings and trading profitability. It further
considered contingent liabilities, guarantees and commitments and the Group’s current risk management policies and
procedures. The Committee agreed with management’s conclusion that in each plausible scenario the testing provided comfort
that Bupa was expected to remain a going concern.
Restoring trust in audit and corporate governance reforms
The Committee is overseeing management’s response to the reforms proposed by the UK Government's former Department for
Business, Energy and Industrial Strategy (BEIS) and the Financial Reporting Council (FRC) on restoring trust in audit and
corporate governance (the Reforms). The Reforms could impose additional responsibilities on companies and audit committees
in relation to corporate reporting, internal controls and external audit requirements. The exact scope and nature of many of the
requirements is still uncertain, with further detailed proposals yet to be published for consultation. The Committee has also
agreed that an Audit and Assurance Policy should be developed as this is consistent with the wider objective of the Reforms to
build trust and credibility by improving the quality of corporate reporting. This Policy will cover both financial and non-financial
reporting, including our wider ESG reporting.
The Committee and the Bupa Risk Committee annually assess Bupa's system of risk management and internal control and
report their findings to the Bupa Board. See page 42 for the Bupa Board’s conclusion on the Group’s risk management and
internal control environment during 2022. However, we are considering whether our internal control system could be further
strengthened in response to aspects of the Reforms which may not be mandatory for Bupa but with which we may choose to
comply. The Committee has asked management to ensure that the IMS is utilised as much as possible in any activity to
strengthen our internal controls (see the Risk Committee's report on page 39 for more details of the IMS).
The FRC’s new Draft Minimum Standard for Audit Committees is being reviewed and the Committee will consider appropriate
changes to its terms of reference when the final standard is published.
Group Internal Audit (GIA)
The assurance provided by GIA is an important part of the Committee’s consideration of Bupa’s overall control environment.
Further details on the role of GIA and its work during the year are available in the Bupa’s system of governance section on page
27, and information on the Group’s RMF can be found in the Governance section on page 26. During 2022, the Committee
interaction with GIA included:
•
Reviewing regular reports from the CAO covering GIA’s progress towards completing its 2022 Global Assurance Plan,
findings from GIA assurance activity and the effectiveness of management’s actions in responding to these findings,
and insights relating to root causes of findings and thematic issues – all of which help the Committee to monitor the
effectiveness of risk management and control across the Group
•
Reviewing the Group’s integrated report on the ongoing effectiveness of Bupa’s systems of internal control and risk
management, including the CAO’s opinion
•
Reviewing and approving GIA's risk-based 2023 Global Assurance Plan and budget (2023 Plan). The Committee is
satisfied that GIA has the appropriate resources and ways of working to achieve its 2023 Plan.
GIA’s effectiveness is assessed internally each year, with an external quality assessment at least every five years. In 2022 the
Committee commissioned an external quality assessment of GIA to assess its effectiveness and compliance with the Global
Governance
For the year ended 31 December 2022
35
Institute of Internal Auditors' international standards (the Standards) and the FS Code. The external assessor presented the
results to the Committee in January 2023. They reported that GIA met a high level of conformance with the Standards and the
FS Code. The Committee agreed with the external assessor that GIA is an effective, innovative, well-respected and valued
function that focuses its work in the right areas of the business, and delivers high-quality assurance outcomes. The Committee
clarified areas for ongoing future development which are in line with GIA’s strategy, including: embedding data-led analytics
assurance capabilities; executing its digital strategy; further evolving principles-based assurance methodology. The Committee
noted the recommended enhancements and that GIA had plans in place to implement these during 2023.
Chief Audit Officer
The Committee is responsible for the appointment and removal of the CAO and, through the Chair, sets the CAO’s objectives
and reviews their performance, taking into account the views of the Group CEO. The CAO has access to the Committee Chair
and Bupa Board Chairman as required and is directly accountable to the Committee. The current CAO has been in role since
August 2019. I held regular meetings with the CAO throughout the year, and the CAO met in private with the full Committee
twice without management being present.
External Auditor
During the year, the Committee assessed the performance of PwC in conducting the audit of the 2021 Annual Report which was
its first year of engagement as External Auditor. The assessment was carried out using questionnaires sent to Committee
members, standing attendees and the chairs of the audit committees of the Group’s major insurance subsidiaries. Overall, the
Committee agreed that the audit had been effective and of good quality with PwC providing good challenge to management on
accounting policies and key issues and judgements. However, the audit had been delivered later than planned, leading to a
delay in announcement of the Group’s 2021 Full Year Results. The Committee acknowledged that the first audit was more
complex than usual for a variety of reasons. However, the Committee felt that this outcome could have been avoided if there
had been greater visibility of the progress of the audit during the process. PwC acknowledged the complications that arose
during its first audit of Bupa and had met with management to agree what steps could be taken for the 2022 audit to avoid a
recurrence of this situation.
In the interest of safeguarding the independence of the External Auditor, Bupa complies with the relevant regulatory
requirements and the FRC’s Ethical Standard for auditors, relating to the provision of non-audit services by the External Auditor.
The Committee monitors compliance with Bupa’s Non-Audit Services Policy and all non-audit service engagements entered into
with PwC in 2022 were approved in compliance with the requirements of this policy. This included the engagement to provide
limited assurance over Bupa’s 2021 GHG Emissions Report being approved by the Committee due to its value.
The Committee holds regular meetings with the lead audit partner of the External Auditor without management present to
ensure that they had the opportunity to raise any concerns, particularly in relation to the Annual Report and the Solvency and
Financial Condition Report, and to assist the Committee in ensuring that the External Auditor remains independent and
objective. I held regular meetings with the lead audit partner throughout the year. The Committee approved the external audit
plan and audit fee for the audit of the 2022 Annual Report. For information on the fees paid to PwC for non-audit services
provided during the year see Note 2.3.3 on page 76.
The Committee has recommended to the Board that PwC be re-appointed as the Group’s External Auditor at the 2023 AGM.
The Group intends to tender the External Auditor appointment at least every ten years. More information on the role of the
External Auditor and how PwC maintains its independence from Bupa is set out in Bupa’s system of governance section on
page 28.
Liaison with other Board Committees
The Committee works closely with the Risk Committee and has held joint meetings to receive updates on the control
environment in our businesses in Türkiye, Chile and Poland, and an update on the IMS programme. A joint meeting was also
held in early 2023 to consider an integrated assurance report giving the opinions of all three lines on the Group’s control
environment in relation to the 2022 financial year. As noted above, a joint meeting was held with the Bupa Board Sustainability
Committee in late 2022 to review the Group’s draft 2021 GHG Emissions Report and the limited external assurance over this
report.
In early 2023, I attended a meeting of the Bupa Remuneration Committee to provide a view on the quality of Bupa’s earnings in
2022 to aid the Bupa Remuneration Committee’s decision on the appropriateness of the financial performance data used in
connection with the calculation of the bonuses potentially payable under the incentive schemes within the Bupa Remuneration
Committee’s remit.
Governance
For the year ended 31 December 2022
36
Subsidiary governance
The chairs of each of Bupa’s major insurance subsidiary audit committees are invited to attend a meeting of the Committee
each year and provide a written update annually. The Market Unit heads of internal audit join the subsidiary audit committee
chairs when they present to the Committee. This provides valuable insights to the Committee and to the subsidiary audit
committee chairs on the issues that are material in each context. I also attend a meeting of each of the major insurance
subsidiary audit committees each year and meet with the subsidiary's internal audit director. The minutes of the meetings of the
major insurance subsidiary audit committees are also made available to the Committee.
Committee effectiveness review
Dr Tracy Long, of Boardroom Review, observed a meeting of the Committee in late 2022 and discussed the operation of the
Committee in her individual interviews with the Committee members. The evaluation report indicated that the Committee was
working well, noting in particular its good use of time and quality of discussions. The report has assisted in identifying priorities
for 2023, in particular the increased focus on sustainability reporting and on collaboration with the Bupa Board Sustainability
Committee.
The 2021 internal review of the Committee’s effectiveness concluded that the Committee was operating effectively. During the
year, the Committee reviewed progress against the recommendations from the 2021 review and was satisfied that they were
being addressed. Details of the Committee’s interactions with the audit committees of Bupa’s major insurance subsidiaries, the
Group’s reporting controls environment, and the alignment of Bupa’s assurance functions are provided above.
Focus for 2023
During 2023, the Committee will focus on preparations for how we address the BEIS and FRC requirements on restoring trust in
audit and corporate governance, Bupa's first external reporting under IFRS 17 and on enhancing the quality of the Bupa
Group's sustainability disclosures.
Paul Evans
Audit Committee Chair
Bupa Risk Committee report
The Committee’s role and governance
The principal role of the Committee is to assist the Board in articulating and developing its risk management strategy and
providing oversight of risk across Bupa. This includes understanding current and future risk exposures, recommending overall
risk appetite to the Board, reviewing the consistency of corporate strategy with the Company’s risk appetite, reviewing the RMF,
considering the risk aspects of major transactions, and promoting a risk-aware culture throughout Bupa. A full description of the
Committee’s role is set out in its Terms of Reference which are available on bupa.com. A detailed description of the principal
risks to Bupa’s business is set out in the Risk section on page 17, and the Bupa Group’s approach to, and implementation of,
risk management systems and controls is set out in the System of governance section on page 26.
The Committee members are all independent NEDs whose collective experience and knowledge ensures that the Committee
can provide the Board with ongoing risk management oversight and advice on strategic risk matters. Paul Evans, Sally Clark
and I bring additional technical experience from our extensive backgrounds in the accountancy, internal audit, insurance, and
financial services sectors, and Paul is also a Non-Executive Director on the boards of Bupa's UK insurance business. Matías
Rodríguez Inciarte has similar experience and is also a Non-Executive Director of the Group’s Spanish insurance business.
Through Matías and Paul, the Committee therefore has direct insight into two of our key markets. Professor Melvin Samsom
has an extensive medical background, which is especially relevant when considering clinical risks, while his recent experience
in Saudi Arabia offers insight into one of Bupa’s growth markets. Gunjan Bhow joined the Committee during the year and the
Committee has benefited from his experience in risks related to digital transformation and data. The Bupa Group CEO, CFO,
CRO, CMO, CAO and the lead partner of the External Auditor are invited to attend all meetings. The CRO has unrestricted
access to all members of the Committee and has regular private meetings with the Committee, in the absence of management,
to ensure that there is an opportunity for the CRO to raise any concerns he may have. I am also a member of the Bupa
Remuneration Committee and am therefore able to assist with ensuring that risk management and culture are a factor in
remuneration decisions.
Governance
For the year ended 31 December 2022
37
Key activities in 2022
Different risks pose a higher or lower threat to the performance and longer-term sustainability of our business at different times
and the Committee adapts its focus accordingly to ensure that new and emerging risks are identified, that the profile of existing
risks is monitored, and that appropriate mitigating actions are taken by management. The Bupa Group’s risk profile has been
heightened in 2022 due to the impact of current global economic conditions, in particular: high inflation; workforce pressures
and the situation in Chile affecting the Isapre sector (as summarised on page 4). See the Risk section on page 17 for details of
the principal risks to the Bupa Group.
Risks to the 3x6 strategy
The Committee has closely monitored the risks to the execution and achievement of our 3x6 Strategy to ensure that change
happens within a suitable control framework. Areas of focus during 2022 have included:
•
the risk that short-term challenges and goals reduce the focus on, and investment in, transformation and building the
business of the future
•
the risk of not changing or not taking opportunities
•
potential capability gaps in certain key strategic areas
•
the actual and potential future impact of high inflation on the achievement of strategic and performance objectives
•
failing to achieve our sustainability strategy
Certain risk elements are also driving some specific strategic performance challenges, most notably increased workforce
pressures, information security, and regulatory or 'stroke of pen' risk in many of our major markets. Regulatory and judicial risks
have crystallised in Chile, as discussed below.
People risks
People are the driving force of our business and so the current global challenges around skills shortages, wage inflation, market
uncertainty and the impact of the rising cost of living (both generally and on mental health and wellbeing specifically) have
heightened our people risks and impacted our ability to attract and retain employees. Bupa is committed to retaining and
developing our people. The Committee is satisfied that managements’ actions, such as setting new global pay principles,
committing to providing healthcare to all employees globally, and recruitment and training initiatives (particularly in our aged
care services and dental businesses), are mitigating these risks to an acceptable level.
Chile judicial and regulatory risks
The Committee has monitored judicial, regulatory and political risks relating to our Isapre business in Chile throughout the year
and management's response to mitigate these risks. These risks increased during the year following the change of government
in Chile, with further political uncertainty, and were further heightened following a Supreme Court ruling in December 2022
affecting the whole Isapre industry. See the Note on Chile on page 4 for more information.
Information security, technology and privacy risks
Information security, technology and privacy risks are always high on the Committee’s agenda as inadequate controls over
these risks, or a failure of such controls, could significantly undermine our customers' trust in us. In response to a heightened
level of information security incidents within the healthcare sector around the world, management continues to take action to
further strengthen controls in certain areas, including the Bupa Group’s cyber-attack response capabilities, and has reported to
the Committee on this. The Committee has also discussed the risks of moving systems and data to cloud providers, noting that,
a safe migration to the cloud could enhance Bupa’s operational resilience.
Clinical risk
During 2022, the Committee has increased its focus on clinical risk and clinical governance and has overseen the strengthening
of clinical governance across the Group. As part of this the clinical governance function has moved from the leadership of the
CMO to the CRO. The Committee has considered the impact of regulatory changes and the challenges in the recruitment and
retention of a high-quality clinical workforce, particularly in Australia, and also received updates from management on the
progress made in evidencing the quality of clinical services received by the Group’s insurance customers from third party
providers.
Sustainability, environment and climate change risks
The Committee considered the key risks and related mitigants associated with Bupa’s sustainability strategy. These include
failing to achieve the sustainability strategy, diluting our sustainability ambitions over time and not keeping pace with our peers
Governance
For the year ended 31 December 2022
38
or the rising expectations of our key stakeholders. The Committee discussed the need for a high level of credibility underpinning
the information and statements published on Bupa’s sustainability activities in order to avoid an adverse impact on Bupa’s
reputation. The Committee have also considered the risks to achieving Bupa’s carbon-neutral targets arising from the current
economic environment, which could drive up the costs of achieving those targets. In relation to climate change, the Committee
reviewed an assessment of the key risks to the Group and the results of a further climate change scenario stress test.
Recovery and Resolution Plans
The PRA requires internationally active insurance groups to put in place Recovery and Resolution Plans at holding company
level to set out potential actions the Company could take to maintain or recover the Group’s solvency in an extreme stress
scenario that threatens the Group's ongoing viability (Recovery Plan) or, if necessary, the steps that the Group could take to
resolve itself in a crisis in an orderly fashion (Resolution Plan). These Plans aim to protect customers as much as possible in
the event that the Company were to face an extreme stress scenario.
The Committee considered the draft Plans in detail ahead of recommending them to the Bupa Board for approval and
submission to the PRA. Management held regular meetings with the PRA to discuss the key judgements involved in preparing
the Plans. Throughout the process, the Committee:
•
challenged management on the feasibility of the recovery options presented within the suggested timescale
•
reviewed the governance process around the drafting of the Plans
•
reviewed the early warning indicators and recovery triggers
•
reviewed the governance process that would be followed to oversee the implementation of the Plans.
These Plans will continue to be developed based on feedback from the PRA and changes to the business over time.
Emerging risks
The Committee regularly monitors emerging risks and specifically considered clinical emerging risk areas that could impact
achievement of the Group’s 3x6 strategy. These included the impact of evolving digital technologies, the use of artificial
intelligence in medicine and genomics. The Committee discussed with management how the legal, regulatory and ethical issues
associated with each of these risks would be addressed. The Committee has monitored the potential risks to the business from
rising inflation and has considered the actions management are taking to mitigate its impact.
Consideration of other emerging risks has focused on those that would be a threat to, or would indicate a weakness in, our
business model. Emerging risks have been taken into account by management when developing the Bupa Group's strategic
objectives, including through identifying mitigating actions, and also to enable the Bupa Group to take advantage of the
opportunities these risks may also present. They cover themes including:
•
Increasing customer, staff and societal expectations
•
Advances in technology
•
Increasing standards of regulation
•
Geopolitical uncertainty and deglobalisation
•
Rapidly advancing medical treatments and technologies, including personalised therapies
•
Climate change
While the emerging risks we considered apply to our insurance, provision and aged care businesses, they could manifest in a
different way in each business, requiring a different response. The Committee will continue to monitor all emerging risks
periodically throughout the year.
Integrated Management System
Building on the progress made over recent years to strengthen Bupa’s risk management and assurance practices, management
have initiated the Group-wide deployment of an Integrated Management System (IMS) described on page 26. The Committee
received a presentation on the IMS in July 2022 and is continuing to monitor its progress. The Audit Committee is also
considering how the IMS operating system could be utilised in Bupa’s response to the BEIS and FRC reforms on restoring trust
in audit and corporate governance, including the use of governance, risk and compliance systems.
Liaison with other Committees
The Committee works closely with the Audit Committee and there is considerable overlap between the membership of the two
committees. The committees held joint meetings in 2022 to receive updates on the control environment in a number of our
businesses, and an update on the IMS programme. A joint meeting was also held in early 2023 to consider an integrated
Governance
For the year ended 31 December 2022
39
assurance report giving the opinions of all three lines on the Group’s risk management and internal control environment in
relation to the 2022 financial year. The conclusions of this assessment are set out in the Audit Committee’s report on page 31.
In early 2023, I asked members of the Committee for their views on whether any Group-wide adjustments should be made to
discretionary remuneration in respect of risk matters arising during 2022. I then attended a meeting of the Remuneration
Committee to give the Committee’s view, to aid the Remuneration Committee’s decision on whether any risk-related
adjustments should be applied to the financial performance data used in connection with the calculation of the bonuses
potentially payable under the incentive schemes within the Remuneration Committee’s remit. No Group-wide adjustments were
recommended, although I indicated that the Committee would be monitoring the risk environment in Australia closely going
forward.
Other
In addition, the Committee has carried out other business as required under its Terms of Reference including: reviewing and
recommending the Group’s annual Own Risk and Solvency Assessment (ORSA) to the Board for approval, including the results
of a worldwide stress and scenario test based on an inflation-driven economic scenario; reviewing the Group’s insurance
coverage; considering risk assessments in contemplation of commencing business in new territories for the Group; and
reviewing the modelling of economic capital as part of the Group’s annual ORSA process. A number of risk appetite statements
have been reviewed to ensure that they remain appropriate in the current environment and the Group-wide Enterprise Risk
Policies are reviewed on a cyclical basis at least every two years by the appropriate Board committee.
Subsidiary governance
The chairs of each of Bupa’s major insurance subsidiary board risk committees are invited to attend a meeting of the Committee
each year and to provide written updates periodically. This provides valuable insights both to the Committee and to the
subsidiary board risk committee chairs on the issues that are material in each context and facilitates Group oversight of local
risks and appropriate escalation of risks to the Committee. I also attend a meeting of each of the major insurance subsidiary
board risk committees each year and meet with the relevant chief risk officer. The minutes of the meetings of the major
insurance subsidiary board risk committees are also made available to the Committee.
Committee effectiveness review
Dr Tracy Long, of Boardroom Review, observed a meeting of the Committee in late 2022 and discussed the operation of the
Committee in her individual interviews with the Committee members. The evaluation report indicated that the Committee was
working well, in particular due to its clarity of role and attention to the priorities. The report has assisted in identifying priorities
for 2023, in particular the intended focus on information security risks.
The 2021 internal review of the Committee’s effectiveness concluded that the Committee was operating effectively. The
Committee identified a number of areas to focus on in 2022 as a result of discussion of the 2021 internal review as follows:
•
The impact of the 3x6 strategy on the Group’s risk profile
•
Climate change risks to our health insurance and provision businesses and how management are addressing these
•
Further strengthening clinical risk management
•
Continuing our work on risk management maturity.
The Committee is satisfied that these areas have received sufficient oversight during the year as disclosed above.
Focus for 2023
In 2023, the Committee will focus on:
•
People risks
•
Information security, IT and operational resilience risks, including the potential crossover with reputational risk and
contagion risk
•
Clinical governance and reporting
•
Third-party risks
•
Further refining the Group’s Recovery and Resolution Plans
•
Maintaining oversight of the implementation of the IMS project across the Bupa Group.
Governance
For the year ended 31 December 2022
40
Other statutory information
Insurance and indemnities
Bupa has a directors’ and officers’ insurance policy in place, together with indemnities for the Directors and certain senior
managers, to the extent permitted by English law and the Company’s Articles of Association.
These cover all losses arising out of, or in connection with, the execution of their powers, duties, and responsibilities, as
Directors of the Company or of any of its subsidiaries. These have been in place throughout 2022 and to the date of this Annual
Report. There are no other qualifying third-party indemnity provisions or pension indemnity provisions in place.
Disclosure compliance
The Strategic Report and the audited financial statements are presented on pages 3 to 25 and from page 56, respectively. The
Governance report on pages 26 to 43 comprises the Directors’ report.
The following disclosures required to be contained in the Directors’ report under the Companies Act 2006 and related
regulations, or required to be contained in the annual report under Listing Rule 9.8.4, are set out on the pages referred to below
and incorporated by reference into this Directors’ report:
Disclosure
Location
Financial instruments
Note 10
page 96
Risk management objectives and policies
Note 26
page 113
Likely future business developments
Strategic Report page 5
Acquisitions and disposals
Note 24
page 110
Financial performance
Page 3
Relationships with suppliers, customers, and others
Section 172 statement page 12
Political donations
Our policy is not to make donations to political parties or to independent election candidates and we will not do so without
specific endorsement from our AMs. We confirm that we do not believe that we have made any political donations, nor incurred
any political expenditure within the definition contained in s364 of the Companies Act 2006 (as amended) (the Act), during 2022.
Going concern
The Directors confirm that they are satisfied that the Company and the Group have adequate resources to continue in operation
for the next 12 months. Accordingly, they continue to adopt the going concern basis in preparing the financial statements. The
going concern assessment in Note 1: Basis of Preparation includes information on the Directors’ detailed assessment of the
Group’s status as a going concern.
Longer-term viability
Our Directors have examined the outlook for the Company and the Group as required by provision 31 of the Code, assessing
our ability to operate and meet our liabilities as they fall due over a three-year period.
Our 3x6 strategy introduced in 2021 is the driving force behind our transformation agenda and planning process. We chose a
three-year assessment period for the longer-term viability assessment because it ties in with our internal planning process. Our
planning considers all important financial and regulatory measures over the period and stresses the key risks facing individual
Business Units, as well as global risks that could impact Bupa as a whole. This included a broad range of potential adverse
outcomes from the Chile Supreme Court judgment described on page 4, including scenarios that considered materially worse
outcomes than the Solvency II capital allocated against the contingency given the inherent uncertainty surrounding the
implementation of the Supreme Court judgement.
Other scenarios considered included a Group-wide assessment of a worsening of the global inflationary outlook driven by
strong wage inflation leading to a wage-price inflation spiral and subsequent recession, and a variety of local scenarios
developed by each Business Unit with the majority focusing on strategic workforce related risks impacting either the availability
or cost of staff. This process shows the Group remains robust over the current three-year plan period, even under the stressed
scenarios examined.
We also conduct ‘reverse stress testing’ at the Group level which aims to identify hypothetical circumstances that might result in
our business model failing and helps our Directors to better understand the Group’s risks. The Group remains most exposed to
failure through a lack of liquidity at the Group centre although multiple improbable events are required to induce failure before
management actions in the timeframe considered.
Governance
For the year ended 31 December 2022
41
As part of their assessment of our viability, the Directors looked at our financial performance, capital management, cash flow,
solvency and future outlook. Bupa is well capitalised and is expected to remain so over the plan period. The liquidity position of
the Group is expected to remain strong across the three-year period. The forecast assumes that the remaining £250m portion of
the subordinated bond maturing in 2023 is repaid from available liquidity. The forecast also assumes that a £300m senior bond
maturing in 2024 is refinanced with a similar instrument upon or before maturity. While this provides some uncertainty, Bupa’s
strong ratings and proven access to bond markets provide considerable comfort. Under the most severe economic scenarios
considered as part of our stress testing, the forecast liquidity position reduces and further management actions would be
required to remain within the Group’s liquidity appetite by 2024. Management actions include reducing expenditure, obtaining
additional funding or divesting investments or businesses.
Our most recent Own Risk and Solvency Assessment (ORSA), which brings together the outcomes of risk management and
financial management processes, considers the level of regulatory capital we require to remain financially stable over the
planning period given the nature of the risks we currently face, our strategy and our risk appetite. It takes into account the
quantification of the Group’s current risks as defined by the Solvency II Directive and considers the impact of potential stressed
scenarios which are aligned with our risk profile. This assessment concluded that we expect to have sufficient capital assets to
continue to meet regulatory requirements over a three-year period.
Although Bupa pays interest on its borrowings, it has no shareholders and there are therefore no dividends to pay. Instead, we
can invest in growing organically and through acquisition. This expenditure is largely discretionary and can be reduced if
required.
Following a review of the key risks and uncertainties set out in the Risk section on pages 17 to 25, the Directors are satisfied
that we have appropriate risk management and governance procedures in place to manage and mitigate these risks over the
three-year period. We also identify and report on emerging risks to ensure that they are properly understood and are considered
in our future strategic decisions.
The Directors’ assessment considered both current expectations, and reasonably plausible severe scenarios, including those
arising from the potential impacts of significant global economic uncertainty on the Group. While continuing uncertainty exists
as a result of the economic aftermath of the COVID-19 pandemic, which has been exacerbated by the effects of the war in
Ukraine, the Group’s diversified business model continues to support the viability of the Group over the period considered.
Based on this analysis and our regular risk and capital reporting processes, the Directors have a reasonable expectation that
Bupa will be able to continue in operation and meet its liabilities as they fall due throughout the three-year planning period up to
31 December 2024.
Dividends
The Company paid an interim dividend of £89 million (2021: £52 million) during the year. No final dividend is proposed.
Effectiveness of risk management and internal control systems
In line with the Principles set out in the Code, the Bupa Board completed an annual review of the Bupa Group’s systems of risk
management and internal controls in 2022, covering the Bupa Group’s material controls, including financial, operational and
compliance, and the impact of the volatile economic situation on the control environment. This review took into consideration
the work of the Bupa Audit and Risk Committees during the year, including reports provided to those Committees from the first,
second and third lines. In making its assessment, the Bupa Board received and reviewed an integrated assurance report which
set out an overall assessment of the Group’s systems of risk management and internal control in 2022. The Bupa Board has
concluded that Bupa has a sound system of risk management and internal control, with some weaknesses which are being
addressed by management and monitored by the Bupa Risk and Audit Committees.
Assessment of emerging and principal risks
The principal and significant risks to the Group, and how they are being mitigated, are set out in the Risk section on page 18.
The Risk Management Framework, which sets out Bupa’s process for the ongoing identification and management of these risks
and emerging risks, is described in the Governance section on page 26. This process has been in place throughout the year
and to the date of this report and is regularly reviewed by the Bupa Risk Committee. These are reported to the Bupa Risk
Committee on a regular basis through reports from the CRO, and any proposed changes in risk appetite are reviewed by the
Bupa Risk Committee and approved by the Bupa Board. The Bupa Risk Committee’s report on page 37 explains its activities in
relation to emerging risks during the year.
Governance
For the year ended 31 December 2022
42
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report and Accounts and the Group and Parent Company financial
statements, in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and
Parent Company financial statements for each financial year. Under that law they have elected to prepare the Group and the
Parent Company financial statements in accordance with UK-adopted international accounting standards in conformity with the
Act.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and Parent Company and of their profit or loss for that period. In preparing each of
the Group and Parent Company financial statements, the Directors are required to:
•
Select suitable accounting policies and then apply them consistently
•
Make judgements and estimates that are reasonable, relevant, and reliable
•
State whether they have been prepared in accordance with UK-adopted international accounting standards
•
Assess the Group and Parent Company’s ability to continue as a going concern
•
Use the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company or
to cease operations or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and
enable them to ensure that its financial statements comply with the Act. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due
to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets
of the Group and to prevent and detect fraud and other irregularities.
The Directors consider that the Annual Report and financial statements taken as a whole are fair, balanced and understandable,
and provide the information necessary for the shareholder to assess the Group’s position and performance, business model
and strategy.
The Directors have decided to prepare, voluntarily, a Corporate Governance Statement as if the Company was required to
comply with the UK Listing Rules, Disclosure Guidance and Transparency Rules of the Financial Conduct Authority in relation to
those matters.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Disclosure of information to the External Auditor
The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are each aware, there
is no relevant audit information of which the Company’s External Auditor is unaware; and each Director has taken all the steps
which they ought to have taken as a Director to make themselves aware of any relevant audit information, and to establish that
the Company’s External Auditor is aware of that information.
External Auditor appointment
A resolution to re-appoint PricewaterhouseCoopers LLP as External Auditor will be put to the forthcoming AGM of the Company.
On behalf of the Board
James Lenton
Director
1 March 2023
Company number: 2779134
Governance
For the year ended 31 December 2022
43
Report on the audit of the financial statements
Opinion
In our opinion:
•
Bupa Finance plc’s Group financial statements and Company financial statements (the “financial statements”) give a
true and fair view of the state of the Group’s and of the Company’s affairs as at 31 December 2022 and of the
Group’s loss and the Group’s cash flows for the year then ended;
•
the Group financial statements have been properly prepared in accordance with UK-adopted international accounting
standards as applied in accordance with the provisions of the Companies Act 2006;
•
the Company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure
Framework”, and applicable law); and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Directors' Report and Financial Statements (the “Annual Report”),
which comprise: the Consolidated and Company Statements of Financial Position as at 31 December 2022; the Consolidated
Income Statement and Consolidated Statement of Comprehensive Income; the Consolidated Statement of Cash Flows; the
Consolidated and Company Statements of Changes in Equity for the year then ended; and the notes to the financial
statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not
provided.
Other than those disclosed in Note 2.3.3, we have provided no non-audit services to the Company or its controlled undertakings
in the period under audit.
Our audit approach
Context
Bupa Finance plc (Bupa Finance) is part of the Bupa Group, which is an international healthcare group, providing health
insurance, health provision and aged care services. Bupa Finance is an intermediate holding company, providing financing and
treasury management for the Bupa Group's businesses and has issued listed debt as part of these activities. These financial
statements are consolidated, incorporating the four reportable segments: Bupa Asia Pacific; Europe and Latin America; Bupa
Global and UK; and Other businesses, which includes investments in associates. In planning for our audit, we met with the
Audit Committee and members of management across the Group to discuss and understand the businesses and any significant
changes during the year, and to understand their perspectives on associated business risks. We used this insight, in addition to
our understanding of the previous year's audit, when forming our own views regarding the audit risks and as part of developing
our planned audit approach to address those risks. Given the activities of the Group, we have teams with the relevant industry
experience in all significant locations in which the Group operates. The COVID-19 pandemic has continued to have an impact
on some of Bupa’s global operations throughout 2022. In planning our audit, we have considered the impact of the pandemic on
the Group’s business and the financial statements. Where necessary, we have utilised virtual technologies and collaborative
workflow tools to obtain sufficient, appropriate audit evidence whilst working in this hybrid environment. As the restrictions on
travel have eased, we have met with a number of our component teams and local management in person to fulfil our ISA 600
(UK) responsibilities. We have also considered the sustainability commitments made by the directors and considered the
potential impact of climate change related factors in our audit, including challenging management on their assessment of how
climate change related risks and opportunities impact the financial statements.
Independent auditors’ report to the members of Bupa Finance plc
44
Overview
Audit scope
•
The Group has four reportable segments, in addition to the Group Centre activities. Each reportable segment
includes a number of reporting components across different locations and service lines.
•
We conducted audit testing over 36 components. These were selected based on our assessment of inherent risk and
their financial significance to the consolidated financial results.
•
21 components were subject to an audit of their complete financial information.
•
Specific audit procedures were performed on certain balances and transactions for a further 15 components.
•
Our audit scope provided coverage of 92% of IFRS Loss before taxation expense.
Key audit matters
•
Goodwill impairment, including the allocation of impairment to goodwill and other intangible and tangible assets
(Group)
•
Valuation of provisions arising from insurance contracts (Group)
•
Valuation of freehold property and investment property (Group)
•
Application of IAS 29 - financial reporting in hyperinflationary economies (Group)
•
Classification, recognition and disclosure of certain liabilities relating to Isapre Cruz Blanca (Group)
•
Valuation of equity impact from the transition to IFRS 17 (Group)
•
Recoverability of the Company’s investment in subsidiaries (Company
)
Materiality
•
Overall Group materiality: £30.8 million (FY21: £26.9 million) based on 5% of loss before taxation expense adjusted
for certain non-recurring items (FY21: Profit before taxation expense).
•
Overall Company materiality: £14.1 million (FY21: £24.2 million) based on 1% of Net Assets (FY21: Total assets).
•
Performance materiality: £23.1 million (FY21: £20.2 million) (Group) and £10.6 million (FY21: £18.1 million)
(Company)
.
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether or
not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we
make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The application of IAS 29 - financial reporting in hyperinflationary economies; the classification, recognition and disclosure of
certain liabilities relating to Isapre Cruz Blanca; and the valuation of the equity impact from the transition to IFRS 17 are new
key audit matters this year. Otherwise, the key audit matters below are consistent with last year.
Independent auditors’ report to the members of Bupa Finance plc (continued)
45
Key audit matter
How our audit addressed the key audit matter
Goodwill impairment, including the allocation of impairment to
goodwill and other intangible and tangible assets
(Group)
Refer to Audit Committee Report and Notes 1.3 and 3 (for
accounting policy and financial disclosures)
Where an individual asset or Cash Generating Unit (“CGU”) has an
indication of impairment, or for CGUs that have been allocated
Goodwill (whether there are impairment indicators or not), these
should be tested for impairment. An impairment review of a CGU
covers all of its tangible assets, intangible assets and attributable
goodwill. Where the recoverable amount of an individual asset or
CGU is lower than the carrying value of a CGU, an impairment loss
is recognised.
Estimating and discounting the cash flow projections used in the
impairment assessments requires significant judgement. The key
assumptions vary by CGU and include the discount rate and the
forecast cash flows, including the terminal growth rate.
We identified four CGUs as having a higher risk of impairment,
namely Bupa Dental Care UK, Bupa Care Services, Bupa Villages
and Aged Care Australia and Bupa Chile and the valuation of the
goodwill and intangible assets in these CGUs was an area of audit
focus. As disclosed in Note 3 of the financial statements, significant
impairments have been recognised in all four CGUs.
•
Bupa Dental Care UK – Goodwill £191m (2021: £467m),
impairment loss recognised to Goodwill of £274m, to
other intangible assets of £255m and to other tangible
assets of £117m;
•
Bupa Care Services – Goodwill £nil (2021: £90m),
impairment loss recognised to Goodwill of £90m;
•
Bupa Chile – Goodwill £nil (2021: £130m), impairment
loss recognised to Goodwill of £139m and to intangible
assets of £22m; and
•
Bupa Villages and Aged Care Australia– Goodwill £nil
(2021: £99m), impairment loss recognised to Goodwill of
£103m.
For three of the CGUs, there is no identified goodwill remaining
following the impairment testing performed, therefore, the valuation
uncertainty is reduced, although there continues to be inherent
uncertainty in estimating and discounting the cash flow projections.
For the Bupa Dental Care UK goodwill, the inherent uncertainty in
estimating and discounting the cash flow projections means there is
a range of potential outcomes greater than our materiality from
plausible alternative assumptions.
Allocation of impairment in Bupa Dental Care UK CGU
For the Bupa Dental Care UK CGU, the methodology and
assumptions applied in performing the impairment assessment and
subsequent allocation of the impairment between goodwill, intangible
assets and tangible assets, is inherently complex.
For goodwill and intangible asset impairment, we performed the
following procedures over management’s impairment assessments:
Discount rates
•
Used our valuation experts to assess the appropriateness
of management’s methodology for computing the
Weighted Average Cost of Capital used for discounting
projected cash flows in the Value in Use calculations,
including the change to using a spot rate approach.
•
Used our valuation experts to independently determine a
reasonable range for the CGU discount rates, using
external comparable market information where possible.
Assessed whether the rates used by management were
within our reasonable range.
Model integrity
•
Verified the discounted cash flow models, including
validating the numerical accuracy of the models and the
application of the discount rates.
Cash flows
•
Agreed cash flow forecasts to internal supporting
documentation, including approved Business Plans.
•
Compared cash flow forecasts used in the review to
historical performance and challenged management
where forecasts indicated performance that deviated
significantly from historical performance.
•
Challenged key assumptions in the cash flow projections,
including expected occupancy rates in care homes, care
minute rates in Australian care homes, dental clinician
hours and retention rates and the terminal growth rates
applied, and obtained supporting internal or external
information.
•
Performed sensitivity analyses on the key assumptions.
Allocation of impairment
•
Assessed whether the methodology to allocate the
impairment within Bupa Dental Care UK to the related
goodwill, intangible and tangible assets was in
accordance with IAS 36, Impairment of assets.
•
Verified the application of the methodology and assessed
whether the assumptions applied were reasonable.
Disclosure
•
Assessed the appropriateness of the relevant disclosures
to confirm compliance with the applicable financial
reporting standards.
Based on the procedures performed and the evidence obtained, we
consider that the impairment losses recognised were appropriate and
the remaining valuation of goodwill in these CGUs is reasonable.
Independent auditors’ report to the members of Bupa Finance plc (continued)
46
Valuation of provisions arising from insurance contracts
(Group)
Refer to Audit Committee Report, and Note 19.1 (for accounting
policy and financial disclosures)
Provisions arising from insurance contracts comprise provisions for
unearned premiums and provisions for claims.
We consider the valuation of the provisions for claims, including the
deferred claims liability in Australia as a key area of audit focus given
the magnitude and inherent uncertainty involved in this estimate.
Provisions for claims
£1,264m (2021: £1,093m)
The calculation of the outstanding claims provision is based on
certain key assumptions, including expected claims development
patterns, a margin for prudence, claims inflation and expected trends
in medical costs and treatments.
Deferred claims provision
£181m (2021: £163m)
Government restrictions affected insurance customers’ ability to
access treatment in private healthcare facilities and make claims,
particularly for elective procedures. In Australia, a deferred claims
provision is held due to regulatory commitments to fund the deferred
medical service, even if the service were to postdate a customer’s
contract period.
This deferred claim provision is held on a best estimate basis (plus a
margin for prudence) and represents the estimated cost of claims
that are expected to rebound after the reporting date. The key
assumption used to calculate the deferred claims provision is the
deferral rate for six months of claims.
The work performed to address the valuation of provisions for
insurance contracts included the following procedures:
•
Understood and evaluated the processes and controls in
place to determine the provisions for claims;
•
Tested the design and operating effectiveness of controls
in place over provisions for claims, including those
covering the approval of assumptions and completeness
and accuracy of data used;
•
Using our actuarial specialists, we:
◦
Applied our industry knowledge and experience and
compared the methodology, models and assumptions
used against recognised actuarial practices;
◦
Evaluated the key assumptions used in the valuation of
provisions for claims for reasonableness compared to
historic experience including the impact of inflation;
◦
Performed independent re-projections for 49% of
provisions for claims, comparing our estimated
provisions to those booked by management, and
investigated differences, where material;
◦
Evaluated the methodology and assumptions applied by
management for a further 40% of provisions for claims,
including reperforming management’s calculations and
performing sensitivities to determine if the assumptions
used were reasonable; and
◦
For the remaining provision performed a diagnostic
check to identify and investigate any anomalies.
•
Evaluated the methodology and assumptions used by
management in calculating the deferred claims provision,
including the assumed deferral rate; and
•
Assessed whether the disclosures related to insurance
contract liabilities, including the deferred claims provision
are compliant with the applicable financial reporting
standards.
Based on the procedures performed and the evidence obtained, we
consider the valuation of the insurance contract liabilities to be
appropriate.
Independent auditors’ report to the members of Bupa Finance plc (continued)
47
Valuation of freehold property and investment property (Group)
Refer to Audit Committee Report and Notes 1.3, 4 and 5 (for
accounting policy and financial disclosures).
The Group holds freehold property (see Note 4 Property, plant and
equipment) and investment property (see Note 5 Investment
property). We consider the valuation of freehold property and
investment property as key areas of audit focus given the magnitude
and inherent uncertainty involved in these estimates.
Freehold properties
Freehold properties of £2,210m (2021: £2,248m) comprise care
homes, care villages, clinics, hospitals and offices across a number
of locations.
The properties are held under the revaluation model and are subject
to periodic, and at least triennial, valuations performed by external
independent valuers. The valuations are conducted by valuation
experts and performed in accordance with relevant industry
guidelines. The properties have been valued as fully equipped
operational entities having regard to the trading potential, reflecting
the specialised nature of the facilities. A capitalised maintainable
earnings or discounted cash flow model is used, assuming a
reasonably efficient operator of the facility.
The valuation is judgemental and involves estimation uncertainty.
The significant assumptions include occupancy levels, estimated net
earnings, capitalisation rates and discount rates. There is also
judgement in the allocation of the fair value of the facility between its
constituent parts, including the property.
Where an external valuation has not been obtained, valuations are
performed by the Directors to support the carrying value of the
property.
I
nvestment properties
Investment properties of £750m (2021: £666m) relate predominantly
to retirement villages in New Zealand. The properties are leased to
third parties to generate rental income.
The properties are held at fair value and subject to an independent
external valuation annually. The valuation is based on discounted
cash flow projections and uses subjective assumptions including the
discount rate and capital growth rate.
For the valuation of freehold property and investment property, we
performed the following procedures:
•
Assessed the appropriateness of the valuation
methodology applied and whether this is in accordance
with the requirements of the relevant standards;
•
Obtained the most recent external valuation reports and
critically assessed the qualifications and experience of the
external valuers to determine whether they have the
knowledge required to perform the valuations;
•
For both external and Directors’ valuations, we challenged
the key assumptions relating to operating cash flows,
such as occupancy rates and discount rates, as well as
reviewing capitalisation rates and the useful lives of
existing facilities. In critically assessing the key
assumptions, we have utilised our own valuation experts,
and considered external benchmarks and forecasts as
well as reports from external chartered surveyors;
•
For Directors’ valuations, we have also challenged
adjustments to the valuation models, with reference to the
most recent external valuation; and
•
Assessed whether the disclosures in relation to the
valuation of freehold and investment properties are
compliant with the relevant financial reporting
requirements.
Based on the procedures performed and the evidence obtained, we
consider the valuation of freehold property and investment property to
be appropriate.
Application of IAS 29 - financial reporting in hyperinflationary
economies (Group)
Refer to Note 1.7 (for accounting policy and financial disclosures)
Since the beginning of 2021, inflation in Türkiye has increased
significantly. Whilst inflation rates have declined in recent months,
reported consumer price inflation was at 64.3% in December 2022.
Türkiye has been designated a hyperinflationary economy for the
year ended 31 December 2022. This requires the Group to apply IAS
29, Financial Reporting in Hyperinflationary Economies. No prior
year restatement is required when applying IAS 29 at the Group
level, but the requirement to restate current period results and non-
monetary balances to the purchasing power at the reporting date
applies and will continue until such time as Türkiye is no longer
considered hyperinflationary.
The application of IAS 29 involves complexity and has a material
impact on the financial statements.
For the application of IAS 29 - Financial reporting in hyperinflationary
economies, we have performed the following procedures:
•
Assessed the appropriateness of non-monetary items to
be indexed to the balance sheet date;
•
Recomputed the indexation of non-monetary items from
the date of inception to the balance sheet date, including
obtaining the appropriate indexation factor from external
sources;
•
Recomputed the indexation of the income statement to
the balance sheet date;
•
Calculated the gain or loss on the net monetary position;
•
Verified the foreign exchange translation using the
exchange rate at the balance sheet date, as opposed to
historic, average, or closing rates;
•
Assessed whether the application of IAS 29 has been
disclosed in accordance with the requirements of the
standard.
Based on the procedures performed and the evidence obtained, we
consider the application of IAS 29 to be appropriate.
Independent auditors’ report to the members of Bupa Finance plc (continued)
48
Classification, recognition and disclosure of certain liabilities
relating to Isapre Cruz Blanca (Group)
Refer to the Audit Committee Report and Note 28 (for accounting
policy and financial disclosures)
In December 2022, the Supreme Court in Chile issued a ruling that
obliges Isapres to make use of a specific table of risk factors in
determining insurance premiums charged going forwards, and
retrospectively over the previous 3 years. Any excess amount
charged to customers is to be returned. The calculation of the impact
of the ruling on Bupa Chile is dependent on detailed application
guidelines which will be issued by the Chilean Superintendent of
Health.
Given the number of variables in determining the amounts that may
need to be returned to customers, and lack of clarity on how the
Superintendent of Health will determine how the ruling would be
implemented in practice, the directors have determined that it is not
possible to reliably estimate the related liability.
Therefore this is disclosed as a contingent liability as explained in
Note 28. The directors have disclosed an indication of financial
impact in relation to the capital held for this matter for Group
Solvency II reporting purposes.
To address the disclosure of the contingent liability we performed the
following procedures:
•
Evaluated management’s assessment that the Supreme
Court Ruling gives rise to a contingent liability, specifically
whether a reliable estimate can be determined;
•
Reviewed announcements made by the Superintendent of
Health relating to the application of the Supreme Court
Ruling;
•
Evaluated the methodology and assumptions used to
calculate the financial effect of the contingent liability as
disclosed in Note 28, considering whether this in itself
provided a reliable estimate; and
•
Assessed whether the disclosures meet the requirements
of IAS 37 Provisions, Contingent Liabilities and Contingent
Assets.
Based on the procedures performed and the evidence obtained, we
consider the classification, recognition and disclosure under IAS 37
Provisions, Contingent Liabilities and Contingent Assets to be
appropriate.
Valuation of equity impact from the transition to IFRS 17
(Group
)
Refer to Note 1.6 (for accounting policy and financial
disclosures).
The impact of the adoption of IFRS 17 on the Group’s net asset
value as at 1 January 2022 is estimated to be £55m.
IFRS 17 is a complex accounting standard which requires judgement
and interpretation in its implementation. In accordance with IAS 8,
insurers, including Bupa, are required to disclose the financial effect
of the implementation of the new Standard.
We have determined the valuation of the estimated impact of IFRS
17 to be a key audit matter because of the significant changes
introduced by the standard, including a number of new estimates
and judgements. For Bupa, the short tailed nature of most of the
Group’s insurance liabilities means that it expects to be able to apply
the premium allocation approach (“PAA”) for most insurance
contracts; this assumption has been the driver of much of the work
this year.
Key areas of focus were:
Unit of account and contract boundaries
The determination of a unit of account and contract boundaries are
new considerations required by the Standard. There is often an
element of judgement in how these are determined and these initial
considerations have downstream implications for PAA eligibility and
on the size of any loss component recognised.
PAA eligibility
The majority of Bupa's policies have a coverage period of one year
or less and are therefore eligible to apply PAA. For policies with a
coverage period greater than 12 months, the Group has performed
eligibility testing to ensure there is no material difference in applying
the PAA or the General measurement model (“GMM”). There is a
small amount of business around the Group that is not eligible for
PAA and for these groups of contracts, the GMM is applied. Ensuring
the measurement model is appropriate is a key judgement of the
Standard.
Loss component
The consideration of units of account drive onerous contract
assessments at a more granular level than under IFRS 4. Under
IFRS 17 loss components have been recognised for groups of
contracts that did not have an associated unexpired risk reserve
under IFRS 4.
Risk adjustment
The Group has taken the decision to use a confidence level
technique to estimate the risk adjustment.
For the work over the valuation of insurance and reinsurance
balances under IFRS 17 our procedures included:
•
Assessing key judgements and conclusions made within
accounting policy papers and verifying that business and
market units were applying these appropriately;
•
Assessing the determination of unit of account;
•
Performing walkthroughs for new processes and
assessing changes to systems;
•
Evaluating the appropriateness of management’s PAA
eligibility analysis, including testing the completeness and
accuracy of supporting data, evaluating reasonably
expected scenarios and testing of the accuracy of models;
•
Evaluating the appropriateness of methodologies and
assumptions used in determining loss components
recognised for the first time under the Standard;
•
Testing the calculation of loss components not previously
recognised;
•
Assessing the appropriateness of the Group’s approach to
the risk adjustment; and
•
Assessing the disclosures in relation to the adoption of
IFRS 17 against the principles of IAS 8.
Based on the procedures performed, we consider the disclosure,
including the estimated equity impact from the transition to IFRS 17,
to be appropriate.
Independent auditors’ report to the members of Bupa Finance plc (continued)
49
Recoverability of the Company’s investment in subsidiaries
(Company)
Refer to Company accounting policies (a) and (j) and Note C (for
financial disclosures)
The Company holds investments in subsidiaries with a carrying
value of £4,046m (2021: £4,961m). An impairment loss of £1,059m
(2021: £27m) was recognised in the year.
To determine if an impairment is required, management compares
the carrying value to a recoverable amount, based on discounting
estimated future cash flows from board approved budgets.
There is inherent uncertainty in forecasting trading conditions and
discounting the future cash flows used in the budgets, with a
potential range of reasonable outcomes greater than our materiality
for the financial statements as a whole.
We performed the following procedures related to the recoverability of
the Company’s investment in subsidiaries:
•
Assessed the reasonableness and appropriateness of the
assumptions used in the cash flows included in the
budgets based on our knowledge of the entities, the
markets in which the subsidiaries operate and cash flow
forecasts used elsewhere, for example in the goodwill
impairment testing;
•
Assessed the reasonableness of the budgets by
considering the historical accuracy of the previous
forecasts and agreeing cash flow forecasts to internal
supporting documentation, including approved Business
Plans;
•
Reviewed the methodology used in determining the
discount rate applied, including engaging our valuation
experts to assess the appropriateness of the inputs into
the discount rate; and
•
Assessed the adequacy of the Company’s disclosures in
respect of the associated impairment.
Based on the work performed and the evidence obtained, we
consider the carrying amount of the Company’s investment in
subsidiaries to be appropriate.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls,
and the industry in which they operate.
For the Group audit we defined a component as being a single reporting pack within the Group’s consolidation process. Based
on the output of our risk assessment, along with our understanding of the Bupa Group structure, we identified 21 components
for which a full scope audit of their financial information has been performed. This was determined by assessing those
components considered to be financially significant and with reference to our risk assessment.
We identified a further 15 components where specific audit procedures were performed on certain balances and transactions to
provide sufficient and appropriate audit coverage over individual financial statement line items.
The components where we performed audit procedures included some operating in each of the Group’s Market Units and
covered 89% of Group Revenue, 92% of Group Loss before taxation expense and 85% of Group Total assets.
We also performed audit procedures over the Group Centre functions, including the consolidation process and certain treasury
and payroll processes.
We performed analytical review procedures over the remaining components.
As the Group audit team, we determined the level of involvement required at those components to be able to conclude whether
sufficient and appropriate audit evidence had been obtained as a basis for our opinion on the consolidated financial statements
as a whole. In our role as Group auditors we exercised oversight of the work performed by auditors of the components including
performing the following procedures:
•
Issued Group instructions outlining areas requiring additional audit focus, including the key audit matters included
above;
•
Maintained an active dialogue with reporting component audit teams throughout the year;
•
Attended meetings with local management;
•
Reviewed reporting requested from component teams, including those areas determined to be of heightened audit
risk; and.
•
Reviewed component team detailed working papers, where relevant. We have performed a detailed review of key
audit working papers at all in-scope components through a mixture of remote working and site visits.
For the Company audit, based on the outputs of our risk assessment, we identified one financially significant component being
the holding company operations.
Independent auditors’ report to the members of Bupa Finance plc (continued)
50
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the process management adopted to assess the extent of
the potential impact of climate risk on the Group’s financial statements. In addition to enquiries with management, we also
understood the governance processes in place to assess climate risk, read internal management reporting on climate risks and
read additional external reporting by the entity on climate, including sustainability publications.
We have also made enquiries to understand, and performed a risk assessment in respect of, the commitments made by the
Group and how these may affect the financial statements and the audit procedures that we perform. We have assessed the
risks of material misstatement to the financial statements as a result of climate change and concluded that for the year ended
31 December 2022, the main audit risks are related to consistency of disclosures included within the Strategic Report.
Our procedures did not identify any material impact in the context of our audit of the financial statements as a whole, or our key
audit matters for the year ended 31 December 2022.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent
of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements - Group
Financial statements - Company
Overall materiality
£30.8 million (FY21: £26.9 million).
£14.1 million (FY21: £24.2 million).
How we determined it
5% of loss before taxation expense adjusted for certain non-
recurring items (FY21: Profit before taxation expense)
1% of Net Assets (FY21: Total assets)
Rationale for benchmark
applied
In determining our materiality, we have considered the financial
metrics which we believed to be relevant, and concluded that
Group Loss before taxation expense adjusted for certain non-
recurring items, notably impairment of goodwill and intangibles
and the amortisation of bed licenses, was the most appropriate
benchmark. This is because the Group is profit-orientated, but
the non-recurring items have significantly distorted the result of
the Group. We consider that the resulting materiality level is
appropriate for the size and complexity of the Group and
relevant to the users of the financial statements. We have
substantively tested the non-recurring items excluded to a
lower materiality level.
In determining our materiality, we considered
the financial metrics which we believed to be
relevant and concluded that Net assets was
the most appropriate benchmark given the
Company has issued listed debt.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality.
The range of materiality allocated across components was £3.0 million to £18.0 million. Certain components were audited to a
local statutory audit materiality that was also less than our overall Group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of
our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in
determining sample sizes. Our performance materiality was 75% (FY21: 75%) of overall materiality, amounting to £23.1 million
(FY21: £20.2 million) for the Group financial statements and £10.6 million (FY21: £18.1 million) for the Company financial
statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls - and concluded that an amount in the middle of our normal range was
appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £1.2 million
(Group audit) (FY21: £1.2 million) and £0.7 million (Company audit) (FY21: £1.1 million) as well as misstatements below those
amounts that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group's and the Company’s ability to continue to adopt the going concern
basis of accounting included:
•
Obtaining the Directors’ going concern assessment and challenging the rationale for downside scenarios adopted and
material assumptions made using our knowledge of the Group’s business performance, review of regulatory
correspondence and obtaining further corroborating evidence;
Independent auditors’ report to the members of Bupa Finance plc (continued)
51
•
Considering management’s assessment of the Bupa Group’s regulatory solvency coverage and liquidity position in
the forward looking scenarios considered;
•
Assessing the impact of severe, but plausible, downside scenarios;
•
Assessing liquidity of the Group and Company, including the Group’s ability to pay customers, suppliers and creditors
as amounts fall due;
•
Assessing the ability of the Group to comply with covenants;
•
Enquiring and understanding the actions taken by management to mitigate any significant risks facing the business,
including attendance at all Group Audit Committee and Group Risk Committee meetings; and
•
Reviewing the disclosures included in the financial statements in relation to going concern, including the Basis of
Preparation.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group's and the Company’s ability to continue as a going concern
for a period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group's and
the Company's ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material
to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors
considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in
this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based
on these responsibilities.
With respect to the Strategic report and Directors' Report, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions
and matters as described below.
Strategic report and Directors' Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and
Directors' Report for the year ended 31 December 2022 is consistent with the financial statements and has been prepared in
accordance with applicable legal requirements.
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the
audit, we did not identify any material misstatements in the Strategic report and Directors' Report.
Corporate governance statement
ISAs (UK) require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the
corporate governance statement relating to the Company’s compliance with the provisions of the UK Corporate Governance
Code, which the Company has voluntarily adopted as if it were a premium listed company subject to the Listing Rules of the
Financial Conduct Authority. Our additional responsibilities with respect to the corporate governance statement as other
information are described in the Reporting on other information section of this report.
Independent auditors’ report to the members of Bupa Finance plc (continued)
52
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial statements and our knowledge obtained during the audit, and
we have nothing material to add or draw attention to in relation to:
•
The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
•
The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are being managed or mitigated;
•
The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their identification of any material uncertainties to the Group’s and
company’s ability to continue to do so over a period of at least twelve months from the date of approval of the
financial statements;
•
The directors’ explanation as to their assessment of the Group's and Company’s prospects, the period this
assessment covers and why the period is appropriate; and
•
The directors’ statement as to whether they have a reasonable expectation that the Company will be able to continue
in operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the Group and Company was substantially less in
scope than an audit and only consisted of making inquiries and considering the directors’ process supporting their statement;
checking that the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering
whether the statement is consistent with the financial statements and our knowledge and understanding of the Group and
Company and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
corporate governance statement is materially consistent with the financial statements and our knowledge obtained during the
audit:
•
The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary for the members to assess the Group’s and Company's
position, performance, business model and strategy;
•
The section of the Annual Report that describes the review of effectiveness of risk management and internal control
systems; and
•
The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the Company’s
compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the
Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the
financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The
directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Company’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 the Company or to cease operations, or have no realistic
alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and
regulations related to certain Group activities where non-compliance with the related laws and regulations could result in fines
or litigation, or loss of the Group’s licence to operate. We consider the areas most likely to have such an effect would be in
Independent auditors’ report to the members of Bupa Finance plc (continued)
53
relation to financial conduct regulation, healthcare provision conduct regulation and regulatory capital and liquidity
requirements. In addition, risks arise from the Group’s required compliance with related taxation legislation (including VAT and
payroll taxes) and the requirements of the FCA handbook is relation to its listed debt, and we considered the extent to which
non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that
have a direct impact on the financial statements such as the Companies Act 2006. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined
that the principal risks were related to management bias in accounting estimates and judgmental areas of the financial
statements, including those shown in our Key Audit Matters, and the override of controls including the posting of inappropriate
journal entries.. The Group engagement team shared this risk assessment with the component auditors so that they could
include appropriate audit procedures in response to such risks in their work. Audit procedures performed by the Group
engagement team and/or component auditors included:
•
Discussions with the Board, management, Internal Audit, senior management involved in the Risk and Compliance
functions and the Group and Company’s legal function, including consideration of known or suspected instances of
non-compliance with laws and regulation and fraud;
•
Evaluation and testing of the operating effectiveness of management’s controls designed to prevent and detect
irregularities;
•
Assessment of matters reported on the Group and Company’s whistleblowing helpline and fraud register and the
results of management’s investigation of such matters;
•
Reviewing relevant meeting minutes including those of the Board of Directors, Remuneration and Disclosure
Committees and attending all Audit Committee and Risk Committee meetings;
•
Identifying and testing journal entries based on risk criteria;
•
Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing;
•
Testing transactions entered into outside of the normal course of the Group and Company’s business; and
•
Reviewing the Group’s register of litigation and claims, Internal Audit reports, and Group Chief Risk Officer’s Reports
in so far as they related to non-compliance with laws and regulations and fraud.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related to events and transactions reflected in the financial
statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or
through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete
populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we
will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, 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.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
•
we have not obtained all the information and explanations we require for our audit; or
•
adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been
received from branches not visited by us; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
•
the Company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 12 May 2021 to audit the
financial statements for the year ended 31 December 2021 and subsequent financial periods. The period of total uninterrupted
engagement is 2 years, covering the years ended 31 December 2021 to 31 December 2022.
Independent auditors’ report to the members of Bupa Finance plc (continued)
54
Other matter
As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial
statements form part of the ESEF-prepared annual financial report filed on the National Storage Mechanism of the Financial
Conduct Authority in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no
assurance over whether the annual financial report has been prepared using the single electronic format specified in the ESEF
RTS.
Joanne Leeson (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
1 March 2023
Independent auditors’ report to the members of Bupa Finance plc (continued)
55
2022
2021
Note
£m
£m
Revenues
Gross insurance premiums
2.1
Premiums ceded to reinsurers
2.1
(132 )
(102 )
Net insurance premiums earned
Care, health and other customer contract revenue
2.1
Other revenue
2.1
Total revenues
Claims and expenses
Insurance claims incurred
2.2
(7,726 )
(7,294 )
Reinsurers' share of claims incurred
2.2
Net insurance claims incurred
(7,629 )
(7,215 )
Share of post-taxation results of equity-accounted investments
6
Impairment of goodwill and intangible assets
3
(894 )
(27 )
Other operating expenses
2.3
(5,669 )
(5,123 )
Other income and charges
2.4
(39 )
Total claims and expenses
(14,178 )
(12,274 )
(Loss)/profit before financial income and expense
(221 )
Financial income and expense
Financial income
2.5
Financial expense
2.5
(174 )
(185 )
Net monetary loss
1.7
(87 )
Net impairment on financial assets
(10 )
(4 )
Net financial expense
(85 )
(92 )
(Loss)/profit before taxation expense
(306 )
Taxation expense
2.6
(112 )
(99 )
(Loss)/profit for the year
(418 )
Attributable to:
Shareholder of Bupa Finance plc
(421 )
Non-controlling interests
(Loss)/profit for the year
(418 )
Notes 1-29 form part of these consolidated financial statements.
Consolidated Income Statement
for the year ended 31 December 2022
56
2022
2021
Note
£m
£m
(Loss)/profit for the year
(418 )
Other comprehensive income/(expense)
Items that will not be reclassified to the Income Statement
Unrealised losses on revaluation of property
4
(44 )
(26 )
Remeasurement gains on pension schemes
7
Taxation credit on income and expenses recognised directly in other
comprehensive income
2.6
Items that may be reclassified subsequently to the Income Statement
Foreign exchange translation differences on goodwill
3
(126 )
Other foreign exchange translation differences
(240 )
Net (loss)/gain on hedge of net investment in overseas subsidiaries
(80 )
Share of other comprehensive income of equity-accounted investments
Change in fair value of financial investments through other comprehensive
income
(4 )
(6 )
Realised gain on disposal of financial investments at fair value through other
comprehensive income
Change in cash flow hedge reserve
(21 )
Release of foreign exchange translation reserve on closure of subsidiaries
Total other comprehensive income/(expense)
(341 )
Comprehensive (expense)/income for the year
(67 )
Attributable to:
Shareholder of Bupa Finance plc
(72 )
Non-controlling interests
Comprehensive (expense)/income for the year
(67 )
Notes 1-29 form part of these consolidated financial statements.
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2022
57
2022
2021
Note
£m
£m
Assets
Goodwill and intangible assets
3
Property, plant and equipment
4
Investment property
5
Equity-accounted investments
6
Post-employment benefit net assets
7
Restricted assets
8
Financial investments
9
Derivative assets
10
Deferred taxation assets
11
Current taxation assets
Assets arising from insurance business
12
Inventories
13
Trade and other receivables
14
Cash and cash equivalents
15
Assets held for sale
16
Total assets
Liabilities
Subordinated liabilities
17
(998 )
(997 )
Other interest-bearing liabilities
17
(648 )
(822 )
Lease liabilities
18
(926 )
(915 )
Post-employment benefit net liabilities
7
(7 )
(9 )
Provisions arising from insurance contracts
19.1
(3,709 )
(3,233 )
Derivative liabilities
10
(137 )
(35 )
Provisions for liabilities and charges
20
(290 )
(270 )
Deferred taxation liabilities
11
(121 )
(171 )
Current taxation liabilities
(34 )
(55 )
Other liabilities arising from insurance business
19.2
(221 )
(213 )
Trade and other payables
21
(2,353 )
(2,170 )
Liabilities associated with assets held for sale
16
(1 )
(4 )
Total liabilities
(9,445 )
(8,894 )
Net assets
Equity
Share capital
23
Property revaluation reserve
Income and expenditure reserve
Foreign exchange translation reserve
(13 )
Equity attributable to shareholder of Bupa Finance plc
Restricted Tier 1 notes
22
Non-controlling interests
29
Total equity
6
Approved by the Board of Directors and signed on its behalf on 1 March 2023 by
James Lenton
Director
Notes 1-29 form part of these consolidated financial statements.
Consolidated Statement of Financial Position
as at 31 December 2022
58
2022
2021
restated¹
Note
£m
£m
Operating activities
(Loss)/profit before taxation expense
(306 )
Adjustments for:
Net financial (income)/expense
(2 )
Net monetary loss
1.7
Depreciation, amortisation and impairment
3,4
Other non-cash items
(21 )
(128 )
Changes in working capital and provisions:
Increase in provisions and other liabilities arising from insurance contracts
Increase in assets arising from insurance business
(211 )
(73 )
Funded pension scheme employer contributions
(1 )
(1 )
Increase in trade and other receivables, and other assets
(191 )
(29 )
Increase in trade and other payables, and other liabilities
Cash generated from operations
Income taxation paid
(232 )
(215 )
Decrease in cash held in restricted assets¹
8
Net cash generated from operating activities
Cash flow from investing activities
Acquisition of subsidiaries and businesses, net of cash acquired
(29 )
(19 )
Investment in equity-accounted investments
6
(14 )
(14 )
Dividends received from associates
Disposal of subsidiaries and other businesses, net of cash disposed of
Divestment of equity-accounted investments
Purchase of intangible assets
3
(111 )
(88 )
Purchase of property, plant and equipment
4
(208 )
(193 )
Proceeds from sale of property, plant and equipment
Purchase of investment property
5
(29 )
(37 )
Disposal of investment property
5
Purchases of financial investments, excluding deposits with credit institutions
(1,720 )
(1,070 )
Proceeds from sale and maturities of financial investments, excluding deposits
with credit institutions
Net (investments into)/withdrawals from deposits with credit institutions
(119 )
Interest received
Net cash used in investing activities
(873 )
(215 )
Cash flow from financing activities
Proceeds from issue of Restricted Tier 1 notes
22
Payment of Restricted Tier 1 coupon
22
(12 )
Proceeds from issue of interest-bearing liabilities and drawdowns on other
borrowings
Repayment of interest-bearing liabilities and other borrowings
(194 )
(983 )
Principal repayment of lease liabilities
(135 )
(130 )
Payment of interest on lease liabilities
18
(46 )
(47 )
Interest paid
17
(64 )
(83 )
Net (payments)/receipts on settlement of hedging instruments
(57 )
Dividends paid
(89 )
(52 )
Dividends paid to non-controlling interests
(2 )
(1 )
Net cash used in financing activities
(548 )
(600 )
Net (decrease)/increase in cash and cash equivalents
(382 )
Cash and cash equivalents at beginning of year¹
Effect of exchange rate changes
(91 )
Cash and cash equivalents at end of year¹˒²
15
1.
Refer to Note 1.5a for details of the restatements.
2.
Includes restricted cash of £78 m (2021: £112 m) which are considered cash and cash equivalents along with bank overdrafts of £2 m (2021: £1 m) which are not
considered as a component of cash and cash equivalents within Note 15.
Notes 1-29 form part of these consolidated financial statements.
Consolidated Statement of Cash Flows
for the year ended 31 December 2022
59
Share Capital
Property
revaluation
reserve
Income and
expenditure
reserve
Foreign exchange
translation
reserve
Total attributable
to shareholder of
Bupa Finance plc
Restricted Tier 1
notes
Non-controlling
interests
Total equity
Note
£m
£m
£m
£m
£m
£m
£m
£m
2022
Balance as at 1 January 2022
(13 )
Initial application of IAS 29
1.7
(84 )
Balance as at 1 January 2022, as restated
(Loss)/profit for the year
(421 )
(421 )
(418 )
Other comprehensive income/(expense)
Unrealised loss on revaluation of property
4
(44 )
(44 )
(44 )
Realised revaluation profit on disposal of
property
(6 )
Remeasurement gain on pension schemes
7
Foreign exchange translation differences on
goodwill
3
Other foreign exchange translation differences
Net loss on hedge of net investment in overseas
subsidiaries
(80 )
(80 )
(80 )
Share of other comprehensive income of equity-
accounted investments
Change in fair value of financial investments
through other comprehensive income
(4 )
(4 )
(4 )
Release of foreign exchange translation reserve
on closure of subsidiaries
Taxation credit on income and expense
recognised directly in other comprehensive
income
2.6
Other comprehensive (expense)/income for
the year, net of taxation
(21 )
Total comprehensive (expense)/income for
the year
(21 )
(412 )
(72 )
(67 )
Payment of Restricted Tier 1 coupon, net of
taxation
22
(10 )
(10 )
(10 )
Dividends to equity holder of the Company
(89 )
(89 )
(89 )
Dividends paid to non-controlling interests
(2 )
(2 )
Balance as at 31 December 2022
Notes 1-29 form part of these consolidated financial statements.
Consolidated Statement of Changes in Equity
for the year ended 31 December 2022
60
Share Capital
Property
revaluation
reserve
Income and
expenditure
reserve
Cash flow
hedge
reserve
Foreign
exchange
translation
reserve
Total
attributable to
shareholder
of Bupa
Restricted
Tier 1 notes
Non-
controlling
interests
Total equity
Note
£m
£m
£m
£m
£m
£m
£m
£m
£m
2021
Balance as at 1 January 2021
Profit for the year
Other comprehensive income/
(expense)
Unrealised loss on revaluation of
property
4
(26 )
(26 )
(26 )
Realised revaluation profit on
disposal of property
(4 )
Remeasurement gain on pension
schemes
7
Foreign exchange translation
differences on goodwill
3
(126 )
(126 )
(126 )
Other foreign exchange translation
differences
(20 )
(6 )
(211 )
(237 )
(3 )
(240 )
Net gain on hedge of net investment
in overseas subsidiaries
Share of other comprehensive
income of equity-accounted
investments
Change in fair value of financial
investments through other
comprehensive income
(6 )
(6 )
(6 )
Realised gain on disposal of financial
investments at fair value through
other comprehensive income
Change in cash flow hedge reserve
(21 )
(21 )
(21 )
Taxation credit/(charge) on income
and expense recognised directly in
other comprehensive income
2.6
(1 )
Other comprehensive (expense)/
income for the year, net of taxation
(44 )
(21 )
(276 )
(338 )
(3 )
(341 )
Total comprehensive (expense)/
income for the year
(44 )
(21 )
(276 )
Issue of Restricted Tier 1 notes
22
Dividends to equity holder of the
Company
(52 )
(52 )
(52 )
Dividends paid to non-controlling
interests
(1 )
(1 )
Balance as at 31 December 2021
(13 )
Notes 1-29 form part of these consolidated financial statements.
Consolidated Statement of Changes in Equity (continued)
for the year ended 31 December 2022
61
Basis of preparation
This section describes the significant accounting policies and accounting estimates and judgements that relate to the financial
statements and notes as a whole. Where accounting policies relate to a specific note, the applicable accounting policies and
estimates are contained within the note.
Basis of preparation
together with its subsidiaries (collectively the ‘Group’) is an international healthcare business, providing health insurance,
Company is The British United Provident Association Limited
Group’).
Both the Company Financial Statements and the Group’s Consolidated Financial Statements have been prepared in
accordance with UK-adopted international accounting standards, in conformity with the requirements of the Companies Act
2006.
The financial statements were approved by the Board of Directors on 1 March 2023. The Directors have reviewed and approved
the Group’s accounting policies which have been applied consistently to all the years presented, other than the application of
IAS 29 described in Note 1.7.
The financial statements are prepared on a going concern basis and under the historical cost convention, modified by the
revaluation of property, investment property, and financial investments at fair value, and the application of IAS 29 to balances in
hyperinflationary economies.
The presentation of line items within the Consolidated Statement of Financial Position is broadly in order of liquidity.
Current assets and liabilities disclosed in the notes to the Consolidated Financial Statements are those expected to be
Basis of consolidation
The Consolidated Financial Statements for the year ended 31 December 2022 comprise those of the Company and its
subsidiaries, and the share of results of equity-accounted investments.
Subsidiaries are those entities over which the Group has control. The Group controls an entity when it has power over it, is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. The Group considers all relevant facts and circumstances when determining whether control
exists and makes a reassessment whenever those facts and circumstances change.
The financial statements of subsidiaries are included in the Consolidated Financial Statements from the date that control
commences to the date that control ceases. Accounting policies of subsidiaries are aligned on acquisition to ensure consistency
with Group policies. Intra-group related party transactions and outstanding balances are eliminated in the preparation of the
Consolidated Financial Statements.
The Group applies the purchase method in accounting for business combinations. The Group recognises identifiable assets,
liabilities and contingent liabilities at fair value, and any non-controlling interests in the acquiree. Non-controlling interests in the
net assets of subsidiaries are identified separately from the Group’s equity. Non-controlling interests consist of the amount of
those interests at the date of the original acquisition and the non-controlling shareholder’s share of changes in equity since this
date.
Functional currencies are identified at a statutory entity level. These vary across the Group and include sterling, Australian
dollar, euro, New Zealand dollar and US dollar. Each Group entity translates its results and financial position into the Group’s
presentational currency, sterling. Unless otherwise noted, the amounts shown in the Consolidated Financial Statements are in
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 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.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
62
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.
Sources of estimation uncertainty
Impairment tests include a number of sources of estimation uncertainty as the key assumptions used when
modelling the recoverable amount require estimating the discount rate, terminal growth rate and the forecast cash
flows. Estimation uncertainties within these cash flows vary by CGU. For aged care these include occupancy rates,
fee rates, staff and agency costs and operating expenses; for provision business, available clinician hours, fee
rates and operating expenses; and for insurance business, future insurance premium rises, claims volatility and
claims inflation.
Key estimation uncertainty in the period has been driven by economic volatility including the associated inflationary
pressures across Bupa's key markets. This has primarily impacted the determination of appropriate discount rates.
In addition, there is increased uncertainty in the underlying cash flow forecasts driven by this economic uncertainty.
Accounting judgements
Judgement has been applied to determine whether there are indications of impairment to intangible assets. In
making this judgement, the Group has considered current trading and future plans associated with each of the
assets in order to assess whether a full impairment assessment is required. Judgement has also been applied in
the methodology used for allocating impairment across assets within the related CGU.
3
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 property are normalised earnings, average occupancy and capitalisation rates,
whereas for investment property key assumptions are discount and capital growth rates.
Accounting judgements
In valuing care home property, a judgement is made on the highest and best use of the property. In the majority of
cases this leads to the property being valued as part of a group of assets making up a going-concern business
using market-based assumptions. The business is valued on a fair maintainable trade basis with the fair value thus
calculated being allocated to plant and equipment and bed licences where applicable at net book value (as a proxy
for fair value), with the residual value being allocated to property.
4,5
Claims
provisioning
Estimates included in the provisions arising from insurance contracts include expected claims payments and
expenses required to settle existing insurance contract obligations.
A deferred claim provision continues to be held within the outstanding claims provision in respect of the health
insurance business in Australia, where the Australian prudential regulator (APRA) had mandated the need to
provide for the rebound of claims following COVID-19 disruption, triggering a constructive obligation for the Group
to pay claims in relation to the disrupted business. The estimated cost of claims expected to rebound after the
reporting date has been calculated as a proportion (the deferral factor) of the observed shortfall in incurred claims,
compared with pre-COVID-19 expectations. This has been recognised on a best estimate basis, together with an
allowance for claims handling costs and an additional risk margin.
Sources of estimation uncertainty
The key assumptions used in the calculation of the outstanding claims provision include claims development,
margin of prudence, claims costs inflation, medical trends and seasonality. In respect of the deferred claim
provision significant assumptions include forecasting the insurance claims that remain deferred at the reporting
date following periods of significant COVID-19 disruption and the percentage of those claims which are likely to
rebound in the future.
19
Unearned
premium
provisioning
The unearned premium provision includes a return of premium provision in respect of the UK Private Medical
Insurance (PMI) business. In April 2020, Bupa Insurance Limited made a commitment to pass back to customers
any exceptional financial benefits experienced by the UK PMI business that ultimately arise as a result of
COVID-19. The provision has been calculated based on estimating the ultimate net reduction in claims costs
attributable to COVID-19, adjusted to take into account incremental costs and profit impacts attributable to
COVID-19, and deducting the estimated costs of deferred claims expected to rebound and COVID-19 related
claims inflation.
Sources of estimation uncertainty
Significant assumptions for the return of premium provision include forecasting the insurance claims that remain
deferred at the reporting date following COVID-19 disruption, including the timing and amount of claims that are
expected to rebound, and in calculating the exceptional financial benefits that are expected to be experienced by
the business, including the identification of incremental costs and profit impacts attributable to COVID-19.
19
Provisions and
contingent
liability
The Group has circumstances arising over 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 contingent liabilities. In the case of material
contingent liabilities further judgment is required in arriving at appropriate disclosure of such matters.
Accounting judgement
Significant judgment has been applied in assessing the contingent liability that has arisen in Chile as a result of the
ruling issued by the Supreme Court in Chile that obliges Isapres to make use of a specific table of risk factors. As
the relevant regulator, the Chilean Superintendent of Health has six months to apply the ruling there is currently
28
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
63
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 liquidity, regulatory solvency, 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 on the Group’s
businesses under a number of reasonably plausible severe scenarios as well as consideration of contingent liabilities. This
included a broad range of potential adverse outcomes from the Chile Supreme Court judgment described in Note 28, including
scenarios that considered materially worse outcomes than the Solvency II capital allocated against the contingency given the
inherent uncertainty surrounding the implementation of the Supreme Court judgement. Other scenarios considered included a
worsening of the global inflationary outlook driven by strong wage inflation leading to a wage-price inflation spiral and
subsequent recession, and a variety of local scenarios developed by each business unit with the majority focusing on strategic
workforce-related risks impacting either the availability or cost of staff. Under each such scenario, significant short-term
reductions in profitability arise, however the Group would still remain within its risk appetites for liquidity and regulatory
solvency. Additionally, the Group has access to a £900m revolving credit facility (RCF) as described in Note 17(c). The Group
expects to remain compliant with the RCF’s covenants under stressed scenarios and may further draw down on the RCF in
order to meet liquidity needs. Additional management actions would allow downside impacts to be further mitigated by reducing
expenditure, obtaining additional funding or divesting investments or businesses.
Details of the Group’s business activities, together with the factors likely to affect its future development, performance and
position, are set out in the Strategic Report on pages 3-25. The financial position of the Group, its cash flows, liquidity position
and borrowing facilities are described in the Financial Review on pages 9-12. The Directors’ assessment of the Group’s longer-
Restatements and changes in accounting policies
Except for the changes detailed in (a) below, the Group has consistently applied its accounting policies to all periods presented
in these Consolidated Financial Statements.
(a)
IFRS Interpretations Committee decision Demand Deposits with Restrictions on Use arising from a Contract with a
Third Party (IAS 7 Statement of Cash Flows)
In March 2022, the IFRS Interpretations Committee (IFRS IC) published its final agenda decision Demand Deposits with
Restrictions on Use arising from a Contract with a Third Party (IAS 7 Statement of Cash Flows). This agenda decision
considered whether an entity should include a demand deposit as a component of cash and cash equivalents in its statement of
cash flows and financial position when the demand deposit is subject to contractual restrictions on use agreed with a third party.
The IFRS IC concluded that restrictions on the use of a demand deposit arising from a contract with a third party do not result in
the deposit no longer being cash unless those restrictions result in the deposit no longer meeting the definition of cash. A
deposit still meeting this definition would be presented as part of cash and cash equivalents on the statement of financial
position, although it could be presented separately if relevant to an understanding of an entity's financial position. Such a
deposit would also be considered part of cash and cash equivalents on the statement of cash flows.
The Group has reviewed the nature of its restricted assets and concluded that certain amounts should be considered part of
cash and cash equivalents on the Consolidated Statement of Cash Flows. The Consolidated Statement of Cash Flows for the
year ended 2021 has therefore been restated, resulting in an increase in the cash and cash equivalents at the beginning of the
year of £100m and an increase in the cash and cash equivalents at the end of the year of £112m. Cash held in restricted assets
has been decreased by £12m.
This restatement had no impact on the Consolidated Statement of Financial Position. All restricted assets continue to be
presented separately on the face of the Consolidated Statement of Financial Position.
(b) Other
A number of other amended standards and interpretations became applicable for the current reporting period. The Group did
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
64
Forthcoming financial reporting requirements
A number of financial reporting standards, amendments and interpretations have been issued but are not effective for the year
ended 31 December 2022 and have not been early adopted by the Group. These include:
(a)
IFRS 17 Insurance Contracts
IFRS 17 Insurance Contracts was issued in May 2017 as a replacement for IFRS 4 Insurance Contracts, with amendments to
IFRS 17 issued in June 2020 and December 2021. The final standard is effective for annual periods beginning on or after 1
January 2023. IFRS 17 requires a current measurement model where estimates are remeasured each reporting period. Under
the general measurement model (GMM), contracts are measured using the building blocks of discounted probability-weighted
cash flows, an explicit risk adjustment, and a contractual service margin (CSM) representing the unearned profit of the contract
which is recognised as revenue over the coverage period. An optional, simplified premium allocation approach (PAA), similar in
nature to the Group’s existing measurement basis, is permitted for eligible short-duration contracts.
IFRS 17 is an insurance standard and although the definition of insurance risk is the same as under IFRS 4, the criteria allowing
contracts to be dealt with under another standard are more stringent and therefore additional business may fall within the scope
of IFRS 17. The Group has reviewed contracts issued to customers by non-insurance businesses against the definition of
insurance risk within IFRS 17. Where there are contract features that could indicate the transfer of insurance risk, management
has reviewed and considered detailed contract terms and analysed supporting profitability data. The Group has concluded that
no additional contracts are brought into scope on adoption of IFRS 17.
In applying the standard, Bupa has reviewed the Group’s insurance and reinsurance contracts and considered the contract
boundary for each type of policy. The majority of policies have a coverage period of one year or less. As a result, the Group has
taken the available policy choice to apply the PAA to these contracts. This approach leads to simplified measurement and
presentation relative to the GMM. The liability for incurred claims (LFIC) is consistent under the GMM and the PAA and due to
the accounting policy choices made by the Group is materially unchanged from outstanding claims provision under IFRS 4. The
LFIC is made up of the best estimate outstanding claims provision, expenses already incurred but not yet paid in relation to
claims and the cost of handling incurred claims at the reporting date.
The liability for remaining coverage (LFRC) under the PAA is valued at initial recognition based on premium received, less any
directly attributable acquisition costs deferred. In subsequent periods, the LFRC is amortised to recognise the revenue and
insurance expenses (insurance acquisition cash flows) on a passage of time basis over the coverage period. If certain
acquisition cash flows paid on new contracts are allocated to future renewals, outside the boundary of the current contract, the
deferred portion is recognised in the carrying amount of the related portfolio of the insurance contract issued. Revenue
recognition is consistent with IFRS 4; however, the balance sheet presentation differs as deferred acquisition costs, relating to
contracts already recognised, and insurance receivables are no longer shown as separate assets but are included within the
LFRC.
Under the PAA, a risk adjustment is recognised on all LFIC balances and LFRC balances for onerous contracts issued. The
Group has taken the decision to use a confidence level technique to estimate the risk adjustment, this leads to a value that is
consistent with the margin of prudence under IFRS 4.
The Group has a small number of policy groups with a coverage period of greater than a year. For these groups of contracts,
the Group has assessed whether the measurement of the LFRC under the PAA is expected to differ materially from that under
the general model. This required the use of a model of the GMM and materiality thresholds determined by management for
these policies, as well as the selection of reasonably expected scenarios against which eligibility is assessed. The majority of
contracts are eligible for the PAA measurement model either automatically or through assessment, but there are small amounts
of business around the Group which are not eligible and require measurement under the GMM. The Group has a legacy
portfolio of individual health contracts in Brazil with a contract boundary of greater than one year; these contracts are onerous
and a GMM valuation is used in the LFRC.
IFRS 17 defines a portfolio of insurance contracts as ‘Insurance contracts subject to similar risks and managed together’. 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 the Group manages the insurance business at geographic ‘Business Unit’
level, the Group has defined portfolios as insurance Business Units at a minimum with further disaggregation if there are other
business lines.
Under the PAA, a portfolio is the level at which policyholder assets and liabilities are presented in the statement of financial
position. Further segmentation is required into groups of contracts for the identification of onerous contracts. There is a
presumption under the PAA that no contracts are onerous unless there are facts and circumstances that indicate otherwise.
However, the requirement to identify onerous contracts means that business is generally accounted for at a level lower than
portfolios, being profitability groupings. This is the basis on which the standard requires various assessments to be made, e.g.
PAA eligibility, and therefore the determination of the unit of account is a key judgement in applying IFRS 17.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
65
To identify potentially onerous contracts, the Group has considered information reviewed by senior management in monitoring
financial performance. Where facts and circumstances are identified that may indicate an onerous contract exists, detailed
testing is performed, and any loss component is valued under GMM by estimating the fulfilment cash flows and an assessment
of the risk adjustment using a confidence level approach and included in the LFRC. As a consequence of onerous contracts
testing occurring at a more granular level, there may be more loss components recognised under IFRS 17 than unexpired risk
provisions recognised following liability adequacy testing under IFRS 4.
Discounting is optional for the LFRC carrying amount if the time between providing each part of the coverage and the related
premium is one year or less and is optional for the LFIC if claims are expected to be paid in one year or less from the date the
claims are incurred.
The Group’s default policy decision is not to discount, as the majority of policies meet the conditions outlined above and the
effect of discounting on the remaining policies is not expected to be material.
However, businesses can seek approval from the
Chief Actuary to discount in exceptional circumstances. It is expected that Bupa Acıbadem Sigorta will apply discounting to both
the LFRC and LFIC due to the high interest rate and high inflation environment in Türkiye. The LFRC for the legacy individual
health policies in Brazil will be discounted due to the long-term nature of these contracts. Where discounting is applied, the
Group policy is to use European Insurance and Occupational Pensions Authority (EIOPA) specified discount rates.
For groups of contracts where all contracts have a coverage period of one year or less, the Group has taken the policy decision
available to expense insurance acquisition cash flows as incurred. Where the contracts within a group have a coverage period
that is greater than one year, this policy choice is not available and these amounts are deferred over the renewal period.
On transition, IFRS 17 should be applied retrospectively and the alternative approaches set out in the standard should only be
used when retrospective application is impracticable. Due to the short-term nature of Bupa’s contracts, with most contracts
measured using the PAA, Bupa will apply the fully retrospective approach
in all cases except for the legacy individual health
policies in Brazil, where a fair value approach will be used.
By applying the PAA and taking the policy choices set out above, the Group’s revenue recognition is consistent with that used
under IFRS 4. The Group’s net assets at transition on 1 January 2022 are reduced by an estimated £55m. This is due to the
derecognition of deferred acquisition costs assets and the recognition of loss component on onerous contracts, offset by the
derecognition of both deferred claims liabilities and the premium deferral provision in our Australian insurance business, as
these are not included under IFRS 17, The requirements of IFRS 17 mean the reduced premium received from customers is
recognised on a passage of time basis over the coverage period and the premium deferral provision is derecognised.
The Group’s implementation project is well progressed, and the Group is well prepared for the reporting requirements from 1
January 2023 onwards.
(b)
IAS 1 amendments
In February 2021, the International Accounting Standards Board (IASB) issued Disclosure of Accounting Policies (Amendments
to IAS 1 and IFRS Practice Statement 2) to help improve accounting policy disclosures for the primary users of financial
statements. Entities must disclose material accounting policies, rather than the current requirement to disclose significant
accounting policies, and the concept of materiality in the context of accounting policies is further defined. The amendments are
effective from 1 January 2023. The application of these amendments is currently being evaluated by the Group. The
amendments are expected to impact Group disclosures, but have no impact on recognition or measurement.
(c)
IAS 8 amendments
Definition of Accounting Estimates (Amendments to IAS 8) was issued by the IASB in February 2021. The amendments
introduce the definition of accounting estimates and include further amendments to help entities distinguish changes in
accounting estimates from changes in accounting policies. The amendments are effective from 1 January 2023. These
amendments are not expected to have a material impact on the Group.
(d)
IAS 12 amendments
In May 2021, the IASB issued Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to
IAS 12) removing an existing deferred tax recognition exemption for transactions that give rise to equal taxable and deductible
temporary differences on initial recognition. A lessee’s recognition of assets and liabilities on inception of a lease is potentially
such a transaction, depending on applicable tax law. The amendments are effective from 1 January 2023. These amendments
are not expected to have a material impact on the Group.
(e) Other
A number of other amendments to standards and interpretations have been issued and are not yet effective for the year ended
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
66
IAS 29 Financial Reporting in Hyperinflationary Economies
Türkiye is now a hyperinflationary economy and IAS 29 Financial Reporting in Hyperinflationary Economies is required to be
applied from June 2022 onwards. As a consequence, the results and balances for the Group's Turkish operations have been
adjusted for changes in the general purchasing power of the Turkish lira. In order to make this adjustment the Group refers to
the consumer price index (CPI) published by the Turkish Statistical Institute. The value of CPI at 31 December 2022 was
1,128.40 and the movement in CPI for the year ended 31 December 2022 was 441.45, an increase of 64.3%. A loss of £87m
arising from the devaluation of net monetary assets has been recognised within net financial expense in the Consolidated
Income Statement. This is partially offset by the impact of indexing amounts in the Consolidated Income Statement for the
application of IAS 29, with the net impact reducing profit before tax by £31m for the year.
All Turkish lira amounts, including transactions in the Income Statement during the year, are translated to the Group's
presentation currency of sterling, using the closing exchange rate in effect on 31 December 2022. of 22.58. The impact of this
adjustment is recorded within other foreign exchange translation differences in the Consolidated Statement of Comprehensive
Income and within the foreign exchange translation reserve in the Consolidated Statement of Financial Position. The Group
recognises the remaining exchange difference arising on consolidation within other foreign exchange translation differences
through other comprehensive income in the foreign exchange translation reserve.
Prior periods have not been restated for the introduction of hyperinflation. The impact as at 1 January 2022 has been recorded
as an opening balance adjustment in the current year. This includes an adjustment of £(84)m to the income and expenditure
reserve in respect of adjusting balances for changes in the general purchasing power of the Turkish lira to that date, and
adjustments to the foreign exchange translation reserve of £105m for the impact of translating the opening balances using the
closing 31 December 2021 exchange rates, in addition to the remaining exchange differences arising on consolidation.
The split of the opening balance adjustment is consistent with how the current period impacts are reported and will be applied
consistently in future years. Of the opening balance adjustment of £21m, £(6)m is in respect of deferred tax and is shown in
Note 11; £25m is in respect of goodwill and intangible assets and is shown in Note 3; £6m is in respect of deferred acquisition
costs and is shown in Note 12; and £(4)m is in respect of unearned premium provision and is shown in Note 19. The net impact
of applying hyperinflationary accounting has been excluded from underlying profit and included within realised and unrealised
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
67
Operating segments
The organisational structure of the Group is managed through three Market Units based on geographic locations and
customers: Bupa Asia Pacific; Europe and Latin America; and Bupa Global and UK. Management monitors the operating results
of the Market Units separately to assess performance and make decisions about the allocation of resources. Bupa China and
the Group’s associate investments, Bupa Arabia and Niva Bupa, are reported within other businesses. The segmental
disclosures below are reported consistently with the way the business is managed and reported internally.
Reportable segments
Service and products
Bupa Asia Pacific
Bupa Health Insurance: Health insurance, international health cover in Australia
Bupa Health Services: Health provision services relating to dental, optical, audiology and medical
assessments and therapy
Bupa Villages and Aged Care Australia: Nursing, residential, respite care and residential villages
Bupa Villages and Aged Care New Zealand: Nursing, residential, respite care and residential villages
Bupa Hong Kong: Domestic health insurance, primary healthcare and day care clinics including diagnostics
Europe and Latin America
Sanitas Seguros: Health insurance and related products in Spain
Sanitas Dental: Insurance and dental services through clinics and third-party networks in Spain
Sanitas Hospitales and New Services: Management and operation of hospitals and health clinics in Spain
Sanitas Mayores: Nursing, residential and respite care in care homes and day centres in Spain
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 insurance and the management and operation of health clinics and hospitals in
Chile
Care Plus: Domestic health insurance in Brazil
Bupa Mexico: Domestic health insurance in Mexico
Bupa Global Latin America: International health insurance
Bupa Global and UK
Bupa UK Insurance: Domestic health insurance, and administration services for Bupa health trusts
Bupa Dental Care UK: Dental services and related products
Bupa Care Services: Nursing, residential, respite care and care villages
Bupa Health Services: Clinical services, health assessment related products and management and operation
of a private hospital
Bupa Global: International health insurance to individuals, small businesses and corporate customers
Associate: Highway to Health (United States of America) (operating as GeoBlue)
Other businesses
Bupa China: Clinical services
Associates: Bupa Arabia (Kingdom of Saudi Arabia) and Niva Bupa (India): Health insurance
Underlying profit
A key performance measure of operating segments utilised by the Group is underlying profit. This measurement basis
distinguishes underlying profit from other constituents of the IFRS reported profit before taxation, not directly related to the
trading performance of the business. Updates have been made to the definition of underlying profit in 2022 due to the Australian
Government announcement on the deregulation of bed licences and as a result of Türkiye becoming a hyperinflationary
economy in 2022.
The Group holds £50m (2021: £83m) of bed licences within Bupa Villages and Aged Care Australia. In September 2021,
following the Australian Government's announcement of the deregulation of bed licences from 1 July 2024, the Group reviewed
the amortisation term and updated them from having an indefinite useful life to being amortised over the period to 1 July 2024.
From 2022, bed licence amortisation has been removed from underlying profit as it is not considered to relate directly to the
trading performance of the business.
The impacts of applying IAS 29 have also been removed from underlying profit as this is how the Group measures the
performance of the business. These impacts have been recognised within the realised and unrealised foreign exchange gains/
losses category below.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
68
The following items are excluded from underlying profit:
-
Impairment of goodwill and intangible assets arising on business combinations – these impairments are not considered
to be reflective of the in-year trading performance of the business.
-
Net gains/losses on disposal of businesses and transaction costs on business combinations – gains/losses on disposal
of businesses that are material and one-off in nature to the reportable segment are not considered part of the continuing
business. Transaction costs that relate to material acquisitions or disposals are not related to the ongoing trading
performance of the business.
-
Net property revaluation gains/losses – short-term fluctuations which would distort underlying trading performance. This
includes unrealised gains or losses on investment properties, deficit on revaluations and 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.
-
Gains/losses on return-seeking assets, net of hedging – fluctuations on investments that are not considered to be
directly related to underlying trading performance.
-
Amortisation of bed licences – Following the Australian Government's announcement of the deregulation of bed licences
from 1 July 2024, their amortisation term was reviewed and updated from having an indefinite useful life to amortising
over the period to 1 July 2024. The impact of this is not considered reflective of the trading performance of the business.
-
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 profit before taxation expense in the Consolidated
Income Statement.
(i) Revenues
Bupa Asia
Pacific
Europe and
Latin America
Bupa Global
and UK
Other
businesses
Total
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Gross insurance premiums
4,367
4,241
3,026
2,663
2,636
2,323
–
–
10,029
9,227
Premiums ceded to reinsurers
(7)
(5)
(28)
(22)
(97)
(75)
–
–
(132)
(102)
Internal reinsurance
(64)
(53)
–
–
64
53
–
–
–
–
Net insurance premiums earned
4,296
4,183
2,998
2,641
2,603
2,301
–
–
9,897
9,125
Care, health and other customer contract
revenue
1,282
1,264
1,550
1,354
1,135
1,081
–
–
3,967
3,699
Other revenue
60
51
12
9
14
14
7
5
93
79
Total revenues for reportable segments
5,638
5,498
4,560
4,004
3,752
3,396
7
5
13,957
12,903
Consolidated total revenues
13,957
12,903
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
69
(ii) Segmental result
Bupa Asia
Pacific
Europe and
Latin America
Bupa Global
and UK
Other
businesses
Total
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Underlying profit for reportable segments¹
331
249
259
185
39
78
58
45
687
557
Central expenses and net interest margin
6
(48)
Consolidated underlying profit before
taxation expense
693
509
Non-underlying items:
Impairments of intangible assets and goodwill
arising on business combinations²
(108)
(18)
(161)
–
(619)
–
–
–
(888)
(18)
Net (loss)/gain on disposal of businesses and
transaction costs on business combinations
4
8
(3)
3
(1)
2
(4)
–
(4)
13
Net property revaluation (loss)/gain
22
17
5
–
(32)
(1)
–
–
(5)
16
Realised and unrealised foreign exchange
(loss)/gain³
–
–
(28)
(3)
16
7
–
1
(12)
5
Amortisation of bed licences
(34)
–
–
–
–
–
–
–
(34)
–
Other Market Unit non-underlying items
⁴
(4)
–
(16)
(9)
(1)
32
–
–
(21)
23
Group non-underlying items
⁵
4
(14)
(Loss)/gain on return-seeking assets, net of
hedging
(39)
3
Total non-underlying items
(999)
28
Consolidated (loss)/profit before taxation
expense
(306)
537
1.
Underlying profit for reportable segments includes share of post-taxation results of equity-accounted investments. Other businesses includes Bupa Arabia and Niva
Bupa. Bupa Global and UK includes Highway to Health. For further information please refer to Note 6.
2.
2022 includes impairments recognised within Bupa Asia Pacific (Bupa Villages and Aged Care Australia), Europe and Latin America (Bupa Chile) and Bupa Global
and UK (Bupa Dental Care UK and Bupa Care Services). For further information please refer to Note 3.
3.
Within the Europe and Latin America segment, 2022 includes decrease in profit before tax of £31m in Bupa Acıbadem Sigorta arising from the effect of IAS 29
Financial Reporting in Hyperinflationary Economies. Within the Bupa Global and UK segment, 2022 and 2021 include the foreign exchange impact of treating
unearned premiums and deferred acquisition costs as non-monetary items.
4.
2022, within the Europe and Latin America segment, includes £16m restructuring costs. 2021, £22m within the Bupa Global and UK segment includes a £40m net
gain on the acquisition of the membership and business of CS Healthcare (see Note 24) and restructuring costs.
5.
2021 includes an £18m loss recognised following the early redemption of £250m of unguaranteed subordinated bonds during the year.
(iii) Other information
The Market Unit segmental results set out in table (ii) above include the following material non-cash items:
Bupa Asia
Pacific
Europe and
Latin America
Bupa Global
and UK
Other
businesses
Total
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Amortisation and depreciation costs for
reportable segments
(193)
(163)
(183)
(184)
(128)
(126)
–
–
(504)
(473)
Unrealised gain on investment property
28
26
–
1
–
–
–
–
28
27
(Deficit)/surplus on revaluation of property
(6)
(8)
5
(1)
(32)
(1)
–
–
(33)
(10)
Share of profits/(losses) from associates
–
–
–
–
3
(3)
50
45
53
42
(iv) Geographical information
The following information has been provided based on the geographical location of the business:
Australasia
United Kingdom
Spain
Rest of the
World
Total
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Total revenues
5,101
5,023
3,547
3,161
1,945
1,776
3,364
2,943
13,957
12,903
Consolidated non-current assets¹
3,267
3,281
2,623
3,327
708
691
1,641
1,575
8,239
8,874
1.
Consolidated non-current assets exclude financial investments, restricted assets, assets arising from insurance business, deferred taxation assets and post-
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
70
Revenues
The Group generates revenues from its underwriting activities (insurance premiums), trading activities through the provision of
healthcare and insurance management services (care, health and other customer contract revenue) and rental income and
other fees (other revenue).
Revenue stream
Recognition policy
Insurance
premiums
Gross insurance premiums
Gross insurance premiums represent the premiums earned relating to risk exposure for the reported financial year. They
comprise gross premiums written, adjusted for the change in provision for unearned premiums that relates to periods of
risk in subsequent financial years. Premiums are shown gross of commission payable and net of insurance premium
taxes that may apply in certain jurisdictions.
In circumstances where a return of premiums is likely to be due to policyholders, a provision for the return of premium is
established within the provision for unearned premiums based on the best estimate of future cash flows. The return of
premium is treated as an adjustment to the initial premium, reducing gross insurance premiums.
Premiums ceded to reinsurers
Premiums ceded to reinsurers represent reinsurance premiums payable for contracts entered into that relate to risk
mitigation for the reported financial year. These comprise written premiums ceded to reinsurers, adjusted for the
reinsurers’ share of the movement in the gross provision for unearned premiums. Premiums relating to reinsurance
treaties are recognised over the period from inception of a treaty to expiration of the related business on a straight-line
basis.
Care, health and
other customer
contract revenue
The Group generates income from the operation of its care homes, hospitals, dental centres and other healthcare and
wellbeing centres. In instances where Bupa is acting as an agent and another party is primarily responsible for fulfilling
the contract, revenue is recognised on a net basis. When considering whether the Group is acting as an agent or as a
principal, factors such as which party is primarily responsible for fulfilling the obligation, bears the inventory and credit risk
and has discretion in establishing prices are considered.
These revenue streams typically relate to short-term services that have fixed, rather than variable, transaction prices and
there are no significant judgements required when considering the time pattern of revenue recognition. Payment terms
vary from on completion of the service, to payments made monthly in advance. Bupa has the right to bill and receive
payment for services rendered to date. Contracts for these revenue streams do not transfer significant insurance risk.
The Sanitas Hospitales and New Services revenue stream includes one public hospital in Spain that is operated under a
separate service concession arrangement granted by the local government (the grantor). Revenue is recognised from the
construction of infrastructure and from the operation of the hospital. Construction revenues are recognised in line with the
stage of completion of the work performed. Operational revenues are recognised in the period in which the services are
provided, based on the average operating margin for the life of the contract. As revenue is based on an expected margin,
with some potential variability, revenue is only recognised to the extent that it is highly probable a significant reversal will
not occur when the uncertainty is resolved. Significant changes in margin result in a retrospective margin recalculation.
The impact of this on prior years is recognised as a margin catch up in the year the recalculation is performed.
Other customer contract revenue includes contracts entered into by the Group’s insurance entities that do not result in
the transfer of significant insurance risk to the Group and are accounted for as service contracts. These contracts mainly
relate to the administration of claims funds on behalf of corporate customers. Revenues from service contracts are
recognised as the services are provided. Some of these contracts contain financial liabilities representing deposits
repayable to the customer. These are measured at amortised cost.
Other revenue
Other revenue comprises:
•
Rental income and amenities fees from occupational right agreements, which are recognised on a straight-line basis
over the term of the arrangement.
•
Imputed interest on interest-free refundable accommodation deposits (RADs) in respect of payments for aged care
units in Bupa Villages and Aged Care Australia. Revenue is recognised for the imputed interest on RADs, reflecting
the Group's position as lessor. Use of the Maximum Permissible Interest Rate (MPIR) is considered most appropriate
to determine the imputed revenue and interest amounts. The MPIR is a rate set by the Australian Government and is
used to calculate the Daily Accommodation Payment to applicable residents.
•
Government funding received in response to COVID-19, most notably in Bupa Villages and Aged Care Australia and
Hong Kong. Such funding is recognised when it is considered reasonably certain that the funding will be received and
all necessary conditions have been complied with.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
71
Revenue for the year has been analysed at Business Unit level, reflecting the nature of services provided by geography that is
reported internally to management.
Care, health and
other customer
contract revenue
Net insurance
premiums earned
Other revenue
Total revenues
2022
2022
2022
2022
£m
£m
£m
£m
Bupa Health Insurance
7
3,957
2
3,966
Bupa Health Services
614
–
1
615
Bupa Villages and Aged Care Australia
318
–
37
355
Bupa Villages and Aged Care New Zealand
148
–
17
165
Bupa Hong Kong
195
339
3
537
Bupa Asia Pacific
1,282
4,296
60
5,638
Sanitas Seguros
10
1,295
4
1,309
Sanitas Dental
119
74
4
197
Sanitas Hospitales and New Services
305
–
1
306
Sanitas Mayores
145
–
–
145
LUX MED
568
18
–
586
Bupa Acıbadem Sigorta
–
256
1
257
Bupa Chile
388
713
1
1,102
Care Plus
4
268
–
272
Bupa Mexico
11
155
–
166
Bupa Global Latin America
–
219
1
220
Europe and Latin America
1,550
2,998
12
4,560
Bupa UK Insurance
21
1,795
5
1,821
Bupa Dental Care UK
487
–
–
487
Bupa Care Services
431
–
–
431
Bupa Health Services
196
–
1
197
Bupa Global
–
808
8
816
Bupa Global and UK
1,135
2,603
14
3,752
Other
–
–
7
7
Other businesses
–
–
7
7
Consolidated total revenues
3,967
9,897
93
13,957
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
72
Care, health and other
customer contract
revenue
Net insurance
premiums earned
Other revenue
Total revenues
2021
2021
2021
2021
£m
£m
£m
£m
Bupa Health Insurance
8
3,876
1
3,885
Bupa Health Services
626
–
1
627
Bupa Villages and Aged Care Australia
317
–
34
351
Bupa Villages and Aged Care New Zealand
146
–
14
160
Bupa Hong Kong
167
307
1
475
Bupa Asia Pacific
1,264
4,183
51
5,498
Sanitas Seguros
8
1,228
2
1,238
Sanitas Dental
110
70
3
183
Sanitas Hospitales and New Services
221
–
–
221
Sanitas Mayores
130
–
–
130
LUX MED
470
13
1
484
Bupa Acıbadem Sigorta
–
166
–
166
Bupa Chile
392
674
2
1,068
Care Plus
3
178
–
181
Bupa Mexico
8
46
–
54
Bupa Global Latin America
12
266
1
279
Europe and Latin America
1,354
2,641
9
4,004
Bupa UK Insurance
18
1,576
4
1,598
Bupa Dental Care UK
493
–
–
493
Bupa Care Services
401
–
–
401
Bupa Health Services
168
–
1
169
Bupa Global
1
725
9
735
Bupa Global and UK
1,081
2,301
14
3,396
Other
–
–
5
5
Other businesses
–
–
5
5
Consolidated total revenues
3,699
9,125
79
2022
2021
£m
£m
Gross premiums written
10,319
9,353
Change in gross provisions for unearned premiums
(290)
(126)
Gross insurance premiums
10,029
9,227
Gross premiums written ceded to reinsurers
(137)
(109)
Reinsurers’ share of change in gross provisions for unearned premiums
5
7
Premiums ceded to reinsurers
(132)
(102)
Net insurance premiums earned
9,897
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
73
2.2
Insurance claims
Insurance claims relate to the Group’s insurance underwriting activities. Insurance claims incurred are amounts payable under
insurance contracts arising from the occurrence of an insured claims episode. 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. This includes amounts in relation to claims episodes in Australia that have not taken place by the reporting date where
the Group has a constructive obligation to fund deferred medical services, due to regulatory or other public commitments
following periods of severe service disruption, as has been the case with COVID-19.
Insurance claims incurred comprise insurance claims paid during the year together with related handling costs, the movement
in the gross provision for claims in the period (which includes a deferred claims provision in respect of COVID-19 disruption in
the Australian health insurance business that was closed to future accrual of deferred claims from 1 October 2022) and the Risk
Equalisation Special Account levy for the Australian health insurance business. See Note 19.1 for details of the claims
provision.
Private health insurers in Australia provide private health insurance cover through a community rated scheme. To avoid adverse
selection and ensure the Australian private health insurance scheme is sustainable, a risk equalisation mechanism operates to
subsidise insurers with higher risk policyholders. The amounts payable or receivable under the Risk Specialisation Account are
determined by APRA after the end of each quarter. Historically, Bupa has paid eligible benefits above the average.
Reinsurers’ share of claims incurred
Reinsurers’ share of claims incurred represents recoveries from reinsurers on claims paid, adjusted for the reinsurers’ share of
the change in the gross provision for claims.
See Note 12 for the related item in the Statement of Financial Position.
2022
2021
£m
£m
Insurance claims paid
7,661
7,267
Change in gross provisions for claims¹
108
88
Risk Equalisation Special Account levy (net of recoveries)
(43)
(61)
Insurance claims incurred
7,726
7,294
Recoveries from reinsurers on claims incurred
(94)
(77)
Reinsurers’ share of change in gross provisions for claims
(3)
(2)
Reinsurers’ share of claims incurred
(97)
(79)
Net insurance claims incurred
7,629
7,215
1.
Change in the gross provisions for claims includes £9m in respect of deferred claims provision recognised at 31 December 2022 (2021: £1m).
Other operating expenses
Other operating expenses include staff costs, medical supplies, overheads, depreciation, amortisation of intangible assets, and
gains or losses on foreign exchange transactions incurred as a consequence of operating our businesses. Costs in relation to
handling claims are included within insurance claims.
Operating expenses exclude insurance claims, finance costs and taxation.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
74
Other operating expenses
2022
2021
Note
£m
£m
Staff costs
2.3.1
2,353
2,239
Acquisition costs
2.3.2
501
427
Medical supplies and fees
1,252
1,186
Property costs
410
242
Lease rentals and other expenses¹
23
23
Marketing costs
120
107
Catering and housekeeping costs
61
57
Consultancy fees
140
112
Net gain on foreign exchange transactions
–
(4)
Amortisation of intangible assets
3
175
149
Depreciation expense
4
329
324
Other operating expenses (including auditors’ remuneration)
2.3.3
305
261
Total other operating expenses
5,669
5,123
1.
Staff costs
The below table represents the total employee benefit expenses incurred by the Group during the year.
2022
2021
£m
£m
Wages and salaries
2,323
2,222
Social security costs
126
121
Contributions to defined contribution schemes
47
43
Other pension costs
4
4
Total staff costs
2,500
2,390
Staff costs relating to claims handling reported in claims
(147)
(151)
Staff costs in operating expenses
2,353
2,239
Employee numbers
The average number of employees, including Executive Directors, employed by the Group during the year was:
2022
2021
Bupa Asia Pacific
15,811
17,290
Europe and Latin America
42,541
40,636
Bupa Global and UK
20,949
21,615
Other businesses
–
4
Total average employee numbers
79,301
79,545
Directors' remuneration
2022
2021
£000s
£000s
Emoluments
2,582
2,510
Company contributions to defined contribution pension schemes
28
29
Amounts receivable under long-term incentive schemes
–
776
Compensation for loss of office
104
–
Total
2,714
3,315
The remuneration of the highest paid director was
Emoluments
1,407
1,003
Amounts receivable under long-term incentive schemes
–
–
Total
1,407
1,003
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
75
2.3.2
Acquisition costs
2022
2021
£m
£m
Commission for direct insurance
451
367
Other acquisition costs paid
73
67
Changes in deferred acquisition costs
(23)
(7)
Total acquisition costs
501
427
The movement in the deferred acquisition costs asset is detailed in Note 12.
Auditors' remuneration
2022
2021
£m
£m
Audit fees for the audit of the Company's annual accounts
0.6
0.5
Fees payable to the Company's auditor and its associates for:
Audit fees for audit of Company's subsidiaries required by legislation
9.2
6.9
Audit fees for audit-related assurance services
1.1
1.2
Audit fees to the Company's auditors
10.9
8.6
Fees payable to the Company's auditor and its associates for other services:
All other non-audit services
0.2
0.2
Total non-audit fees
0.2
0.2
Total auditors' remuneration
11.1
8.8
Audit fees include £1.1m (2021: £nil) in respect of the transition to IFRS 17. Non-audit services fees includes £0.1m in respect
of assurance over internal controls. All non-audit services provided during the year were in compliance with the Group’s non-
Other income and charges
Other income and charges comprise income or expenses that are related to the investing and divesting activities of the Group.
2022
2021
Note
£m
£m
Gain on acquisition of businesses¹
–
42
Net (loss)/gain on disposal and restructuring of businesses
(4)
13
Deficit on revaluation of property
4
(33)
(10)
Net (loss)/gain on disposal of property, plant and equipment
(2)
4
Total other income and charges
(39)
49
1.
2021 gain on acquisition of businesses includes a £42m gain in relation to the acquisition of the membership and business of CS Healthcare (see Note 24). This is
Financial income and expense
Financial income and expense are earned and incurred from the Group’s financial assets and liabilities, and non-financial
assets such as investment property.
Interest income is recognised in the Consolidated Income Statement, using the effective interest method.
Changes in the value of financial assets at fair value through profit or loss are recognised within financial income as unrealised
gains or losses while the assets are held. Upon derecognition of an asset, the cumulative unrealised gain or loss is reversed
and a realised gain or loss is recognised.
Changes in the value of debt instruments at fair value through other comprehensive income are recognised in other
comprehensive income as an unrealised gain or loss. The cumulative gain or loss recognised in the income and expenditure
reserve is reclassified to realised gain or loss in the Consolidated Income Statement when the financial asset is derecognised.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
76
2022
2021
£m
£m
Interest income:
Investments at fair value through profit or loss
61
42
Investments at fair value through other comprehensive income
1
12
Investments at amortised cost
72
18
Net realised gain/(loss):
Net realised (loss)/gain on investments at fair value through profit or loss
(13)
3
Net realised gain/(loss) on financial investments at fair value through other comprehensive
income
–
(1)
Net movement in fair value:
Investments at fair value through profit or loss
(5)
–
Investment property
28
27
Net foreign exchange translation gain/(loss)
42
(4)
Total financial income
186
97
Included within financial income is a net loss, after currency hedging, on the Group’s return-seeking asset portfolio of £39m
Interest payable on borrowings is calculated using the effective interest method.
Finance charges in respect of leases and restoration provisions are charged to the Consolidated Income Statement over the
lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
2022
2021
£m
£m
Interest expense on financial liabilities at amortised cost
99
92
Finance charges in respect of leases and restoration provisions
46
48
Other financial expense¹
29
45
Total financial expense
174
185
1.
For 2022, includes £6m loss recognised following the early redemption of £47m of inflation-linked senior unsecured bonds, originally due to mature on 30 June
2033. For 2021, includes £18m loss recognised following the early redemption of £250m of unguaranteed subordinated bonds during the year, originally due to
mature in April 2023.
Other financial expense includes £20m (2021: £23m) 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
Taxation expense
Taxation expense on the profit for the year comprises current and deferred taxation. It considers foreign taxation and double
taxation relief and includes adjustments in respect of prior periods.
Income taxation is recognised in the Consolidated Income Statement except to the extent that it relates to items recognised
directly in other comprehensive income, in which case it is recognised directly in the Consolidated Statement of Comprehensive
Income.
(i) Recognised in the Consolidated Income Statement
Current taxation is the expected taxation payable on the taxable profit for the year, using taxation rates enacted or substantively
enacted at the reporting date, and any adjustments to taxation payable in respect of previous years.
The Group is subject to taxation audits in the territories in which it operates and considers each issue on its merits when
deciding whether to hold a provision against the potential tax liability that may arise. However, the amount that is ultimately paid
could differ from the amount initially recorded and this difference is recognised in the period in which such a determination is
made.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
77
2022
2021
£m
£m
Current taxation expense
UK taxation on income for the year
25
13
UK taxation adjustments in respect of prior periods
(5)
(12)
Total UK current taxation expense
20
1
Double taxation relief
(8)
(6)
Foreign taxation on income for the year
190
179
Foreign taxation adjustments in respect of prior years¹
–
(45)
Total foreign current taxation expense
190
134
Total current taxation expense
202
129
Deferred taxation expense/(income)
Origination and reversal of temporary differences
(75)
(53)
Adjustments in respect of prior periods
4
9
Changes in taxation rates
(19)
14
Total deferred taxation income
(90)
(30)
Taxation expense
112
99
1.
A favourable decision by the Spanish Supreme Court resulted in the release of a provision of £43m for the year ended 31 December 2021.
(ii) Reconciliation of effective taxation rate
2022
2021
£m
£m
(Loss)/profit before taxation expense
(306)
537
UK corporation taxation rate
19%
19%
Tax at the UK corporation taxation rate
(58)
102
Effects of recurring taxation reconciliation items:
Different taxation rates in foreign jurisdictions
22
34
Deductions not allowable for taxation purposes
23
25
Income not taxable or taxable at concessionary rates
(18)
(11)
Property revaluation not included as a temporary difference
(6)
(7)
Results of associates
(11)
(9)
Changes in taxation rates
(19)
14
Movement in deferred taxation asset not recognised
29
2
20
48
Effects of non-recurring taxation reconciliation items:
Taxation adjustments in respect of prior periods¹
(1)
(48)
Loss on disposal and acquisition of business
–
(4)
Impairment of goodwill and other assets not allowable for taxation purposes
142
–
Non-deductible IAS 29 adjustments²
9
–
Other
–
1
150
(51)
Taxation expense at the effective rate of -37% (2021 18%)
112
99
1.
A favourable decision by the Spanish Supreme Court resulted in the release of a provision of £43m for the year ended 31 December 2021.
2.
Refer to Note 1.7 for details of the adjustments.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
78
(iii) Current and deferred taxation recognised directly in other comprehensive income
2022
2021
£m
£m
Deferred taxation credit/(charge) in respect of:
Unrealised loss on revaluation of property
11
6
Remeasurement gain on pension schemes
–
(1)
Other items including foreign exchange translation differences
1
–
12
5
Current taxation credit in respect of:
Restricted Tier 1 coupon payment¹
2
–
Taxation credit on income and expenses recognised directly in other comprehensive
income
14
5
1.
Goodwill and intangible assets
Goodwill and intangible assets are non-physical assets used by the Group to generate revenues.
Goodwill represents the excess of the cost of a business combination over the fair value of the Group’s share of identifiable
assets, liabilities and contingent liabilities of the acquired subsidiary
at the date of the business combination. The carrying value
of goodwill may be adjusted up to 12 months from the accounting date of acquisition, as the allocation of the purchase price to
identifiable intangible assets is finalised within that period. Goodwill arising on business combinations is capitalised and
presented with goodwill and intangible assets in the Consolidated Statement of Financial Position. Where the fair value of net
assets acquired is greater than the consideration paid, the excess is recognised immediately in the Consolidated Income
Statement.
Goodwill is held at cost less accumulated impairment losses. Impairment reviews are performed annually or more frequently if
there is an indication that the carrying value may be impaired. Impairment reviews are performed at the level of the relevant
cash-generating unit (CGU). In identifying CGUs, the Group considers the smallest identifiable group of assets that generate
Intangible assets, other than goodwill, that are acquired as part of a business combination are recognised at fair value which
represents cost at acquisition and are subsequently held at cost less accumulated amortisation and impairment. Intangible
assets acquired separately are held at cost less accumulated amortisation and impairment.
Costs relating to the development of intangible assets, including computer software, are capitalised once all development phase
recognition criteria are met.
Amortisation is charged to the Consolidated Income Statement on a straight-line basis as follows, excluding any intangible
assets to which
an indefinite useful life has been attributed:
•
Computer software
2-10 years
•
Brand and trademarks
3 years-indefinite
•
Customer relationships
3-20 years
•
Technology and databases
10 years
•
Distribution networks
10-14 years
•
Present value of acquired in-force business
20 years
•
Customer contracts
4-6 years
•
Licences to operate care homes
Term of licence
•
Bed licences in Australia
From 1 October 2021 to 1 July 2024
Intangible assets that are subject to amortisation are reviewed for impairment if circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised in the Consolidated Income Statement to reduce the carrying amount
to the recoverable amount.
Intangible assets with an indefinite useful life, or not yet available for use, are subject to annual impairment reviews or more
frequently if there is an indication that the carrying value may be impaired.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
79
In other intangibles, the Group holds bed licences, with a carrying value of £50m (2021: £83m), with respect to Bupa Villages
and Aged Care Australia CGU. In September 2021, following the Australian Government’s announcement of the deregulation of
bed licences from 1 July 2024, the Group reviewed the amortisation term and reduced it from being an indefinite useful
economic life to cover the period from 1 October 2021 to 1 July 2024. During 2022, the Group has recognised £34m (2021:
£8m) of amortisation in respect of Australian bed licences. In addition, an impairment loss of £2m (2021: £10m) was recognised
in respect of bed licences no longer in use.
Goodwill
Computer
software
Brands/
Trademarks
Customer
relationships
Other²
Total
£m
£m
£m
£m
£m
£m
2022
Cost
At beginning of year
3,233
911
292
924
305
5,665
Initial application of IAS 29¹
16
3
2
–
10
31
Assets arising on business combinations
14
2
3
2
–
21
Additions
–
111
–
–
–
111
Disposals
(53)
(28)
(4)
(6)
(12)
(103)
Other
–
(2)
–
–
–
(2)
Foreign exchange
139
35
29
36
23
262
At end of year
3,349
1,032
322
956
326
5,985
Amortisation and impairment loss
At beginning of year
784
620
159
442
167
2,172
Initial application of IAS 29¹
–
2
1
–
3
6
Amortisation for year
–
72
8
53
42
175
Impairment loss
609
6
22
255
2
894
Disposals
(52)
(27)
(4)
(6)
(12)
(101)
Other
–
(1)
–
–
–
(1)
Foreign exchange
27
21
16
25
11
100
At end of year
1,368
693
202
769
213
3,245
Net book value at end of year
1,981
339
120
187
113
2,740
Net book value at beginning of year
2,449
291
133
482
138
3,493
2021
Cost
At beginning of year
3,440
906
336
918
333
5,933
Assets arising on business combinations
28
–
1
29
4
62
Additions
–
88
–
–
–
88
Disposals
(52)
(56)
(13)
–
(8)
(129)
Transfer to assets held for sale
(17)
–
–
–
–
(17)
Other
(25)
3
–
1
(1)
(22)
Foreign exchange
(141)
(30)
(32)
(24)
(23)
(250)
At end of year
3,233
911
292
924
305
5,665
Amortisation and impairment loss
At beginning of year
798
609
165
403
152
2,127
Amortisation for year
–
69
9
56
15
149
Impairment loss
6
9
–
–
12
27
Disposals
–
(53)
(2)
–
(4)
(59)
Other
(5)
2
–
–
–
(3)
Foreign exchange
(15)
(16)
(13)
(17)
(8)
(69)
At end of year
784
620
159
442
167
2,172
Net book value at end of year
2,449
291
133
482
138
3,493
Net book value at beginning of year
2,642
297
171
515
181
3,806
1.
Refer to Note 1.7 for details of the adjustments.
2.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
80
Goodwill and intangible assets of £2,740m (2021: £3,493m) include £420m (2021: £753m) attributable to other intangible
assets arising on business combinations comprising brand and trademarks, customer relationships and other in the above
table.
Computer software assets with a net book value of £339m (2021: £291m) include £245m (2021: £233m) attributable to
capitalised internal development costs. The cost attributable to these assets is £526m (2021: £461m). £93m of costs (2021:
£72m) were capitalised in the year.
Goodwill and intangible assets with indefinite useful lives are tested at least annually for impairment by comparing the net
carrying value with the recoverable amount, using value in use calculations.
In arriving at the value in use for each CGU, key assumptions have been made regarding future projected cash flows, discount
rates and terminal growth rates. The key business drivers of the cash flow forecasts vary by CGU. For aged care, key drivers
are occupancy rates, fee rates, staff and agency costs and operating expenses. For provision business, the cash flows are
driven by number of customers, available clinician hours, fee rates and operating expenses. For insurance business, key
drivers are assumed business volumes, future insurance premium rate rises, claims volatility and claims inflation. Cash flow
projections have been calculated from management operating profit projections for a five-year period. These are based on the
three-year plan which has been approved by the Board with further projections added for years four and five. Cash inflows or
outflows relating to financing activities have been excluded from the estimated future cash flows.
Taxation has been applied to the pre-taxation management operating profits based on the statutory taxation rates in the country
of operation.
Forecast future post-taxation cash flows have been discounted at post-taxation discount rates. Discount rates have been
derived using a Weighted Average Cost of Capital (WACC) methodology, representing the minimum return a business must
earn on its asset base to satisfy providers of capital. Discount rates used for the value in use calculations for each of the
Group’s CGUs are based on considerations of the systemic risks associated with each CGU, as well as external factors such as
inflation and local market leverage. These include the market assessment of the time value of money and the risks inherent in
the relevant country where the cash flows are generated.
During 2022, global inflation has risen sharply, driven by the aftermath of the pandemic and the war in Ukraine. This has
resulted in increases to central bank interest rates, leading to increasing and more volatile bond yields. In response to the
macroeconomic conditions, the Group has reviewed the methodology for calculating WACC rates and moved from using a
rolling average calculation for obtaining appropriate cost of debt and risk-free rate estimates, to using a spot rate approach as it
is considered to be more appropriate in the current economic environment. The economic situation has driven increases in
WACC rates for many of the CGUs as shown in the table below.
The following table summarises the pre-taxation discount rates used for impairment testing for the main CGUs, which were
determined through grossing up the post-tax discount rates by the applicable corporate taxation rates:
2022
2021
%
%
Bupa Australia Health Insurance
10.0
7.4
Bupa Health Services Australia
13.1
9.3
Bupa Villages and Aged Care – Australia
10.3
9.8
Hong Kong
11.4
10.0
Bupa Chile
13.0
11.5
LUX MED
11.1
8.2
Sanitas Seguros
10.6
8.6
Sanitas Mayores
10.1
8.0
Bupa Acıbadem Sigorta
27.7
17.7
Care Plus
15.8
13.1
Bupa Care Services
8.5
7.0
Bupa Dental Care UK
10.5
7.8
Bupa Global
12.3
11.2
Cash flow projections beyond the forecast periods have been extrapolated by applying a terminal growth rate between 2.0%
and 8.5% (2021: 2.0% and 6.6%) for all CGUs. The terminal growth rates represent an estimate of the long-term growth rate for
each of the CGUs, taking into account the future and past growth rates and external sources of data, such as forecast GDP
growth rates, inflation and long-term consumer price index rates. The values assigned to the key assumptions are based on
past experience of the CGUs and assessment of future trends in the relevant industry.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
81
During the year, an impairment loss of £609m was recognised in relation to goodwill. Significant impairments have been
recognised in Bupa Dental Care UK, Bupa Care Services, Bupa Villages and Aged Care Australia and Bupa Chile.
Bupa Dental Care UK
Bupa Dental Care UK has recognised an impairment of goodwill of £274m, in addition to a £255m write down of its customer
relationship intangible and a £117m write down of right-of-use assets and property, plant and equipment balances. This is due
to the recoverable amount on a value in use basis reducing to £221m driven by an increase in WACC rates in the period from
7.8% to 10.5% and a deterioration of the underlying forecast cash flows of the business.
Cash flow assumptions are highly sensitive to available clinician hours and to operating expenses. Future medium to long-term
cash flow forecasts have been reduced in light of the ongoing under-performance of the business. Operational challenges have
increased in the second half of 2022 due to below target recruitment and retention of clinicians and increasing wage and energy
costs.
After impairment, Bupa Dental Care UK has a remaining goodwill balance of £191m. This remains sensitive to further
impairment should the key assumptions move adversely as shown in the table below.
Headroom
Discount rate
Terminal
growth rate
Reduction in
headroom
from 0.5%
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
–
10.5
2.1
(21)
(17)
(22)
Bupa Care Services
An impairment of goodwill of £90m has been recognised for the Bupa Care Services CGU in 2022, writing off the goodwill
balance to £nil. This is due to the recoverable amount on a value in use basis reducing to £796m predominantly driven by the
increase in the WACC rate in the period from 7.0% to 8.5%.
Bupa Villages and Aged Care Australia
Bupa Villages and Aged Care Australia has recognised an impairment of goodwill of £103m in 2022, writing off the goodwill
balance to £nil. This is due to the recoverable amount on a value in use basis reducing to £296m. This reduction has been
driven by the increase in the WACC rate in the period from 9.8% to 10.3%, along with updates to the cash flow assumptions.
The cash flow assumptions remain highly sensitive to the recovery of occupancy and staff costs. Staff cost forecasts have been
negatively impacted by the inclusion of the cost of implementing minimum mandatory care minutes for residents, which the
Australian Federal Government is bringing into force from 1 October 2023.
Bupa Chile
The Bupa Chile CGU operates domestic health insurance businesses (primarily an Isapre business) and health clinics and
hospitals in Chile. An impairment of £139m has been recognised in respect of the Bupa Chile CGU in 2022, writing off the
goodwill balance to £nil. This is due to the recoverable amount on a value in use basis reducing to £481m driven by increased
WACC rates and reductions in future cash flow forecasts reflective of the local pressures on the Isapre industry that has been
negatively impacted by judicalisation of premium pricing and regulatory action. In addition to the goodwill impairment, Bupa
Chile has recognised a £22m impairment of brand assets relating to the Isapre element of the business in Chile (Isapre Cruz
Blanca). The Group has recognised a contingent liability following a Chile Supreme Court ruling in December 2022 in respect of
risk factor tables used by Isapre Cruz Blanca. This does not impact the impairments noted as the relevant intangible balances
have been fully impaired in 2022. Further details on the contingent liability are included in Note 28.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
82
The following table summarises goodwill by CGU as at 31 December 2022:
2022
2021
£m
£m
Bupa Asia Pacific
Bupa Australia Health Insurance
863
821
Bupa Health Services Australia
299
288
Bupa Villages and Aged Care Australia
–
99
Hong Kong
129
115
Europe and Latin America
Bupa Chile
–
130
LUX MED
265
246
Sanitas Seguros
49
46
Sanitas Mayores
22
21
Bupa Acıbadem Sigorta
53
24
Care Plus
29
26
Other
10
5
Bupa Global and UK
Bupa Care Services
–
90
Bupa Dental Care UK
191
467
Bupa Global
68
68
Other
3
3
Total
1,981
2,449
Sensitivity to changes in key assumptions
Following the full impairment of goodwill in Bupa Care Services, Bupa Villages and Aged Care Australia and Bupa Chile, the
only CGU where a reasonably probable change in assumptions could result in an impairment is Bupa Dental Care UK for which
sensitivities have been provided above.
Management believes that no reasonably probable change in any of the key assumptions for other CGUs would cause the
carrying value of any goodwill or intangible asset with an indefinite useful life to exceed its recoverable amount.
Impairment of other intangible assets
As at 31 December 2022, other intangible assets with indefinite useful lives were tested for impairment with £22m impairment
arising in the current year relating to the write off of the Bupa Chile Isapre brand due to the local legal and regulatory pressures
on the Isapre industry (2021: £nil).
A review of intangible assets that are subject to amortisation resulted in impairments of £263m (2021: £11m), of which £255m is
related to the Bupa Dental Care UK customer list assets and is the result of the overall CGU impairment review, the drivers of
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
83
Property, plant and equipment
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.
Freehold properties
Freehold properties comprise care homes, care villages, clinics, hospitals and offices and are initially measured at cost and
subsequently at revalued amount less accumulated depreciation and impairment losses. These properties are subject to
periodic and at least triennial valuations performed by external independent valuers. Borrowing costs relating to the acquisition
or construction of qualifying assets are capitalised as part of the cost of that asset.
Equipment
Equipment (including leasehold improvements) is held at historical cost less subsequent depreciation and impairment losses.
Depreciation
Freehold land and assets under construction, included within freehold properties, are not depreciated. Depreciation on other
items of property, plant and equipment is calculated using the straight-line method to allocate cost or revalued amount less
residual value over estimated useful lives, as follows:
•
Freehold property
50 years
•
Right-of-use property
Lease term
•
Leasehold improvements
Shorter of useful life or lease term
•
Owned equipment
3-10 years
•
Right-of-use equipment
Lease term
Impairment reviews are undertaken where there are indications that the carrying value of an asset may not be recoverable. An
impairment loss on an asset carried at cost is recognised in other income and charges (see Note 2.4) to reduce the carrying
value to the recoverable amount. An impairment loss on an asset carried at revalued amount is recognised in the property
revaluation reserve, except where an asset is revalued below historical cost, in which case the loss on historical cost is
recognised in the Consolidated Income Statement within other income and charges.
For information regarding leased (right-of-use) assets, see Note 18.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
84
Freehold
property
Right-of-use
asset
property
Leasehold
improvements
Owned
equipment
Right-of-use
asset
equipment
Total
£m
£m
£m
£m
£m
£m
2022
Cost or valuation
At beginning of year
2,296
1,165
297
1,389
15
5,162
Initial application of IAS 29
–
–
–
1
–
1
Assets arising on business combinations
4
4
–
1
–
9
Additions
25
51
38
145
3
262
Transfer to assets held for sale
(27)
–
–
(16)
–
(43)
Disposals
(2)
(44)
(19)
(44)
(1)
(110)
Revaluations
(130)
–
–
–
–
(130)
Remeasurements
–
57
–
–
1
58
Other
(2)
1
2
1
–
2
Foreign exchange
83
54
13
60
1
211
At end of year
2,247
1,288
331
1,537
19
5,422
Depreciation and impairment loss
At beginning of year
48
364
137
814
6
1,369
Initial application of IAS 29
–
–
–
1
–
1
Depreciation charge for year
39
140
25
121
4
329
Transfer to assets held for sale
–
–
–
(8)
–
(8)
Disposals
–
(42)
(17)
(38)
(1)
(98)
Revaluations
(53)
–
–
–
–
(53)
Impairment loss
–
56
31
37
–
124
Other
–
1
–
–
–
1
Foreign exchange
3
21
6
35
1
66
At end of year
37
540
182
962
10
1,731
Net book value at end of year
2,210
748
149
575
9
3,691
Net book value at beginning of year
2,248
801
160
575
9
3,793
2021
Cost or valuation
At beginning of year
2,458
1,180
307
1,388
16
5,349
Assets arising on business combinations
17
2
–
2
–
21
Additions
33
48
20
140
4
245
Transfer to assets held for sale
(12)
(5)
(2)
(10)
–
(29)
Disposals
(43)
(42)
(15)
(60)
(5)
(165)
Revaluations
(60)
–
–
–
–
(60)
Remeasurements
–
42
–
–
–
42
Other
3
(5)
1
(6)
–
(7)
Foreign exchange
(100)
(55)
(14)
(65)
–
(234)
At end of year
2,296
1,165
297
1,389
15
5,162
Depreciation and impairment loss
At beginning of year
35
270
131
792
6
1,234
Depreciation charge for year
40
139
24
117
4
324
Transfer to assets held for sale
–
(2)
(1)
(6)
–
(9)
Disposals
(1)
(32)
(12)
(48)
(4)
(97)
Revaluations
(24)
–
–
–
–
(24)
Impairment loss
–
4
1
1
–
6
Other
–
–
–
(5)
–
(5)
Foreign exchange
(2)
(15)
(6)
(37)
–
(60)
At end of year
48
364
137
814
6
1,369
Net book value at end of year
2,248
801
160
575
9
3,793
Net book value at beginning of year
2,423
910
176
596
10
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
85
Revaluation of properties
External valuations are performed every three years. To ensure that the carrying value does not differ significantly from fair
value at the reporting date, in years where a full external valuation is not scheduled to be completed, a directors’ valuation is
conducted, based on updated cash flows and other market variables. Consideration is also given to whether there are any
factors which indicate a full out-of-cycle external revaluation is required.
In 2022, the external triennial revaluation of properties in the UK have been independently performed by Knight Frank, in Chile
by Phi Partners, in Poland by Knight Frank and in Türkiye by Ekol GD. In addition, full out-of-cycle revaluations have been
performed in Australia by Ernst & Young and in New Zealand by Jones Lang LaSalle (JLL). Directors’ property valuations have
been performed across all other geographies.
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 valuations.
This approach is in line with market practice. 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 applicable at net book value (as a proxy for fair value), with
the residual value being allocated to property.
The valuations of care homes across the Group (and hospitals in Spain and Poland) are therefore determined based on a
capitalisation of earnings approach. Each facility’s normalised earnings are calculated based on what a reasonably efficient
operator could be expected to achieve. This is divided by an appropriate capitalisation rate to determine a value in use. The
capitalisation rate is the average rate of return for each facility and is based on qualitative and quantitative indicators of the
facility’s current and future performance.
The valuations of hospitals and clinics in Chile are determined based on discounted future cash flow projections. The discount
rate is determined according to the time value of money, the level of risk of the industry and the corresponding premium risk.
Unobservable inputs include the capitalisation or discount rate and, for all properties except those in Poland and Chile, the
average occupancy.
All other properties are valued by external valuers based on observable market values of similar properties. Due to the level of
judgement and adjustments required to the observable inputs used in the valuation methodologies, a Level 3 classification,
under the fair value hierarchy in accordance with IFRS 13 Fair Value Measurement, is considered appropriate for all properties
in the Group.
At each revaluation date, accumulated depreciation is eliminated against the gross carrying amount of the asset.
Sensitivity analysis
The significant assumptions used in the calculation of the fair values of the material Level 3 freehold properties in the Group
are:
Freehold properties
Australia
New
Zealand
UK
Spain
Chile
Poland
2022
Valuation assumptions: average occupancy rate
93.1%
91.4%
86.6%
88.4%
N/A
N/A
Valuation assumptions: average capitalisation/
discount rate
15.1%
12.9%
8.9%
19.0%
9.0%
11.6%
Valuation assumptions: average price per square
metre
N/A
N/A
£3,389
£2,391
N/A
N/A
Valuation assumptions: average yield
N/A
N/A
6.3%
5.2%
N/A
N/A
2021
Valuation assumptions: average occupancy rate
94.2%
90.9%
83.4%
81.0%
N/A
N/A
Valuation assumptions: average capitalisation/
discount rate
14.0%
13.5%
10.9%
15.0%
6.9%
10.8%
Valuation assumptions: average price per square
metre
N/A
N/A
£3,977
£2,022
N/A
N/A
Valuation assumptions: average yield
N/A
N/A
5.5%
5.0%
N/A
N/A
The valuations are most sensitive to changes in capitalisation rate assumptions, and an increase/decrease of 0.5% in
capitalisation rates would decrease/increase the total carrying value of freehold properties by £(97)m/£89m (2021: £(96)m/
£100m). An increase/decrease of 0.5% in occupancy rates would increase/decrease the total carrying value of freehold
properties by £8m/£(8)m (2021: £8m/£(9)m).
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
86
The table below shows the date at which freehold properties held as at 31 December 2022 were last subject to external
valuation.
2022
£m
Valuation - 31 December 2022
1,915
Valuation - 31 December 2021
249
Assets held at cost¹
83
Cost or valuation
2,247
1.
Primarily relates to assets under construction and initial fair value of additions.
Gains and losses on revaluation are recognised in the property revaluation reserve, except where an asset is revalued below
historical cost, in which case the deficit is recognised in the Consolidated Income Statement. When a revaluation reverses
losses recognised in the Consolidated Income Statement in prior years, the credit is recognised in the Consolidated Income
Statement.
In the current year, a £44m net revaluation deficit (2021: £26m deficit) has been recognised in the property revaluation reserve,
with a revaluation loss of £33m (2021 loss: £10m) charged to the Consolidated Income Statement within other income and
charges (see Note 2.4).
Recognised in the carrying amount of freehold property is £63m (2021: £70m) in relation to freehold property in the course of
construction.
Historical cost of the Group's revalued freehold property assets
2022
2021
£m
£m
Historical cost of revalued assets
2,088
2,128
Accumulated depreciation based on historical cost
(465)
(423)
Historical cost net book value
1,623
1,705
Depreciation charge for the year on historical cost
42
43
Impairment of tangible assets
A review of tangible assets has resulted in impairments of £124m (2021: £6m), of which £117m is related to Bupa Dental Care
UK and is a result of the overall CGU impairment review, the drivers of which are explained in Note 3.
It has also been identified that there are reasonable changes in assumptions on the Cromwell CGU impairment test that could
lead to the impairment of the £115m right-of-use asset. Currently there is headroom on the CGU of £22m. The headroom is
primarily sensitive to forecast cash flows driven by the mix and volume of procedures, staff costs and operating costs; a 10%
Investment property
Investment properties are physical assets that are not occupied by the Group and are leased to third parties to generate rental
income. Most investment properties held by the Group relate to a portfolio of retirement villages in New Zealand.
Investment properties are initially measured at cost and subsequently at fair value, determined individually, on a basis
appropriate to the purpose for which the property is intended. Investment property is revalued annually with any gain or loss
arising from a change in fair value recognised in the Consolidated Income Statement within financial income and expense.
In an active market, the portfolio is valued annually by an independent valuer, holding a recognised and relevant professional
qualification, and with recent experience in the location and category of investment property being valued.
In Australia and New Zealand, the retirement village market is fragmented as each village is unique due to building
configuration and location. As there are no directly comparable sales from which values can be derived, the fair value of
investment property is determined using inputs that are unobservable. Therefore the Group has categorised investment
property as Level 3 under the fair value hierarchy in accordance with IFRS 13 Fair Value Measurement. These properties are
valued using discounted cash flow projections based on reliable estimates of future cash flows.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
87
2022
2021
£m
£m
At beginning of year
666
627
Additions
29
37
Disposals
(1)
–
Increase in fair value
29
27
Reclassification from property, plant and equipment
–
1
Foreign exchange
27
(26)
At end of year
750
666
In the current year, a revaluation surplus of £28m (2021: £27m) was credited to the Consolidated Income Statement which is
net of £1m (2021: £nil) attributable to occupational right agreement liability holders and is paid upon exit of the retirement
village.
The carrying value of investment properties primarily consists of the Group's portfolio of retirement villages in New Zealand of
£681m (2021: £604m) and Australia of £55m (2021: £50m). These were valued by management using internally prepared
discounted cash flow projections, supported by the terms of any existing lease and other contracts. Discount rates are used to
reflect current market assessments of the uncertainty in the amount or timing of the cash flows. During the year, an independent
valuation of the New Zealand portfolio was performed by Jones Lang LaSalle (JLL), and this valuation, also based on a
discounted cash flow model was in line with management’s valuation.
The historical cost of investment properties is £482m (2021: £440m).
Significant assumptions used in the valuation include:
Australia and New Zealand
Discount rate
14.0%
Capital growth rate
3.2% - 3.5%
The sensitivity analysis below considers the impact on the year end valuation of Level 3 investment properties and is based on
a change in one assumption while holding all other assumptions constant. In practice, changes in assumptions may be
correlated.
Australia and New Zealand
0.5% absolute increase
0.5% absolute decrease
Discount rate
£12m decrease
£13m increase
Capital growth rate
£18m increase
£16m decrease
Retirement villages
During the year ended 31 December 2022, the Group’s retirement village portfolio in Australia and New Zealand generated
£25m (2021: £21m) of income which was recognised as revenue in the Consolidated Income Statement. Total direct operating
Equity-accounted investments
Equity-accounted investments comprise associated companies and joint ventures in which the Group has significant influence,
but not control.
Associated companies include those entities in which the Group has significant influence, but no right to direct the activities
which determine the variable returns it receives from the entity.
Associated companies are accounted for using the equity method and are initially recognised at cost. The cost of the
investment includes transaction costs. The carrying value of the investment is adjusted for the Group’s share of any post-
acquisition profits or losses of the associated entity.
If the Group’s share of losses exceeds its interest in an equity-accounted investment, the carrying amount of that interest
(including any long-term debt interests that, in substance, form part of the Group’s net investment), is reduced to £nil. In
addition, the recognition of further losses is discontinued except to the extent that the Group has an obligation to make
payments on behalf of the equity-accounted investment.
The Consolidated Financial Statements include the Group’s share of income and expenses, and other comprehensive income,
after adjustments to align the accounting policies with those of the Group where materially different, from the date that
significant influence commences until the date that significant influence ceases.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
88
The carrying amount of equity-accounted investments is £1,032m (2021: £905m). 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
Niva Bupa Health Insurance Company Limited (Niva Bupa)
Insurance
44.39%
India
India
During the year, the Group received dividends of £52m (2021: £34m) from Bupa Arabia for Cooperative Insurance Company
(Bupa Arabia).
During the year, the Group's shareholding in Niva Bupa was diluted from 44.75% to 44.39% due to Niva Bupa employees
exercising their share options. The Group made further capital injections in Niva Bupa of £14m (2021: £14m). Distributions to
shareholders are currently restricted by local regulatory requirements which are reassessed on a regular basis.
(i)
Summarised financial information for material associates
The tables below provide summarised financial information for those associates that are material to the Group. The information
disclosed reflects the full balances for the relevant associates, and not the Group's share of those amounts. They have been
amended to reflect adjustments made by the Group when using the equity method, including fair value adjustments and
modifications for differences in accounting policies.
Bupa Arabia
Highway to Health
Niva Bupa
2022
2021
2022
2021
2022
2021
£m
£m
£m
£m
£m
£m
Revenue
2,765
2,058
201
157
245
154
Cash and cash equivalents
283
89
94
80
9
4
Other current assets
1,458
1,658
122
95
27
20
Current assets
1,741
1,747
216
175
36
24
Non-current assets
1,415
694
10
8
319
213
Current liabilities
(2,202)
(1,623)
(123)
(94)
(110)
(71)
Non-current liabilities
–
–
(3)
(3)
(141)
(96)
Net assets
954
818
100
86
104
70
Reconciliation to carrying amounts
Bupa Arabia
Highway to Health
Niva Bupa
2022
2021
2022
2021
2022
2021
£m
£m
£m
£m
£m
£m
Opening net assets
818
761
86
87
70
40
Profit/(loss) for the year
129
115
8
(5)
(8)
(15)
Other comprehensive income
6
14
–
–
–
–
Dividends paid
(116)
(79)
–
–
–
–
Other reserve movements
117
7
6
4
42
45
Closing net assets
954
818
100
86
104
70
% Ownership
43.25%
43.25%
49.00%
49.00%
44.39%
44.75%
Reporting entity’s share¹
412
354
49
42
35
24
Goodwill
307
274
196
175
20
20
Carrying amount
719
628
245
217
55
44
Reporting entity's share of profit/(loss)
57
49
2
(3)
(3)
(7)
1.
Reporting entity’s share excludes subordinated debt recorded under equity for Niva Bupa as the Group has no rights over the debt.
(ii)
Individually immaterial equity-accounted investments
In addition to the interests in associates disclosed above, the Group also has interests in a number of individually immaterial
associates and joint ventures that are accounted for using the equity method. The aggregate carrying amount of these
associates and joint ventures is £13m (2021: £16m). The Group’s share of results recognised during the year for these is a loss
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
89
Post-employment benefits
The Group operates several funded defined benefit and defined contribution pension schemes for the benefit of employees.
Defined contribution pension schemes
The defined contribution pension schemes provide employees with a retirement fund accumulated through investment of
contributions made by Bupa and the employees. Members of the scheme use their funds to secure benefits at retirement.
Benefits are not known in advance and the investment and longevity risks are assumed solely by the members of the scheme.
Contributions payable by the relevant sponsoring employers are defined in the scheme rules or plan specifications and these
contributions are recognised as an expense in the Consolidated Income Statement as incurred.
Defined benefit post-employment schemes
The defined benefit pension schemes provide benefits based on final pensionable salary. The Group’s net obligation in respect
of defined benefit pensions is calculated separately for each scheme and represents the present value of the defined benefit
obligation less the fair value of scheme assets. The discount rate used is the yield at the 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.
All remeasurements are recognised in full in the Consolidated Statement of Comprehensive Income in the period in which they
occur.
(i)
Amounts recognised in the Consolidated Income Statement
The charge to the Consolidated Income Statement for defined benefit schemes is £nil (2021 £nil).
The charge to other operating expenses in respect of cash contributions to defined contribution schemes is £47m (2021: £43m).
(ii)
Amounts recognised directly in other comprehensive income
The amounts charged/(credited) directly to equity are:
2022
2021
£m
£m
Actual return less expected return on assets
23
–
Gain arising from changes to financial assumptions
(26)
(3)
Loss/(gain) arising from changes to experience assumptions
1
(1)
Gain arising from changes to demographic assumptions
(1)
–
Total remeasurement gains credited directly to equity
(3)
(4)
7.1
Group post-employment benefit schemes
Defined contribution pension schemes
The principal defined contribution pension scheme in the UK during the year was the My Bupa LifeSight Plan. The Group
automatically enrols any eligible non-pensioned employees into the National Employment Savings Trust (NEST).
Defined benefit post-employment schemes
The principal defined benefit scheme in the UK is The Bupa Pension Scheme which has been closed to new entrants since 1
October 2002 and closed to future accrual since 31 December 2020. The British United Provident Association Limited is the
principal sponsoring employer for The Bupa Pension Scheme. The Company (which is not an employer in respect of the
scheme) had entered into a legally binding and irrevocable guarantee for the benefit of the trustee in respect of the payments
due from Bupa. Please see the 2022 Bupa Annual Report and Accounts for full details.
There are several other smaller defined benefit pension schemes operated by UK and overseas subsidiaries. The defined
benefit pension schemes are assessed by independent scheme actuaries in accordance with UK or local practice and under
IAS 19 as at 31 December 2022 for the purposes of inclusion in the Group’s Consolidated Financial Statements.
Trustees are appointed for each scheme as determined by its respective trust documentation and Trustees are required to act
in the best interests of the schemes’ beneficiaries. The long-term investment objectives of the Trustees and the employers are
to limit the risk of the assets failing to meet the liabilities of the schemes over the long term, and to maximise returns consistent
with an acceptable level of risk.
The smaller defined benefit pension schemes are not individually material to the Group on a net surplus/deficit basis, but details
have been disclosed within the subsidiary financial statements of the relevant sponsoring employer of each scheme.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
90
(a)
Assets and liabilities of schemes
2022
2021
£m
£m
Present value of funded obligations
(54)
(82)
Fair value of scheme assets
49
74
Net recognised liabilities
(5)
(8)
In the Consolidated Statement of Financial Position:
Net liabilities
(7)
(9)
Net assets
2
1
Net recognised liabilities
(5)
(8)
(b)
Present value of schemes' obligations
The movements in the present value of the schemes' obligations are:
2022
2021
£m
£m
At beginning of year
82
88
Interest on obligations
1
1
Gain from changes to financial assumptions
(26)
(3)
Loss/(gain) from changes to experience assumptions
1
(1)
Gain from changes to demographic assumptions
(1)
–
Benefits paid
(4)
(3)
Foreign exchange
1
–
At end of year
54
82
(c)
Fair value of funded schemes' assets
The movements in the fair value of the funded schemes' assets are:
2022
2021
£m
£m
At beginning of year
74
77
Interest income
1
1
Return on assets excluding interest income
(23)
–
Contributions by employer
1
1
Benefits paid
(4)
(4)
Foreign exchange
–
(1)
At end of year
49
74
The market values of the assets of the funded schemes are as follows:
2022
2022
2021
2021
£m
%
£m
%
Cash/other assets
13
26
10
14
Government bonds
12
25
18
24
Corporate bonds
11
23
16
22
Loans
7
14
14
19
Equities
6
12
16
21
Total market value
49
100
74
100
Certain assets have been reclassified within the table above and prior year amounts have been updated to reflect this.
Aside from corporate and government bonds in the table above, no other assets have a quoted market price.
Amounts reported in the table above include those held through pooled investment funds in which Bupa is not the sole investor,
as well as direct investments.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
91
7.2
Actuarial assumptions
The responsibility for setting the assumptions underlying the IAS 19 valuations rests with Bupa's Directors, having first taken
advice from the Group’s independent actuary.
The key weighted average financial assumptions used when valuing the obligations of the post-employment benefit schemes
under IAS 19 for the schemes within the Group are as follows:
2022
2021
%
%
Inflation rate
3.2
3.4
Rate of increase in salaries
3.0
3.0
Rate of increase of pensions in payment
3.6
3.0
Rate of increase of pensions in deferment
3.1
3.0
Discount rate for scheme assets and obligations
5.0
1.7
(a)
Actuarial assumptions underlying the valuation of obligations
The inflation rate assumption is set by reference to the difference between the yield on long-term fixed interest gilts and the real
yield on index-linked gilts, with a deduction of 0.2% to reflect an inflation risk premium.
The rate of increase in salaries is equal to the long-term expected annual average salary pay increase for the employees who
are members of the respective schemes. This assumption is set relative to the inflation rate assumption.
The rate of increase of pensions in payment is the same as the inflation rate, with the exception of benefits which receive fixed
increases in payment as defined under the respective scheme rules.
The rate of increase of pensions in deferment is set relative to the inflation rate assumption and adjusted for any relevant caps
or collars.
The discount rate used to value scheme liabilities is the yield at the reporting date on high-quality corporate bonds of
appropriate term.
An increase/decrease in the discount rate by 0.5%, while holding all other assumptions constant, would result in a decrease/
increase in the defined benefit pension scheme liabilities by £3m (2021: £6m).
(b)
Mortality assumptions
The mortality tables adopted as at 31 December 2022 are the S3PA year of birth mortality tables using the CMI 2021 projection
model, with a long-term rate of improvement of 1.5% p.a. adjusted by 95% (male non-pensioners); 94% (female non-
pensioners); 90% (male pensioners) and 92% (female pensioners) (2021: CMI 2020 projection model, with a long-term rate of
improvement of 1.5% p.a. adjusted by 95% (male non-pensioners); 94% (female non-pensioners); 90% (male pensioners) and
92% (female pensioners)).
2022
2021
Average life expectancy for members aged 60, on the valuation date:
Male
27.9
27.9
Female
29.7
29.6
Average life expectancy for member aged 45, on the valuation date:
Male
28.8
28.7
Female
30.9
30.8
(c)
Assumptions over duration of liabilities
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
92
Restricted assets
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.
2022
2021
£m
£m
Non-current restricted assets
40
45
Current restricted assets
79
113
Total restricted assets
119
158
The non-current restricted assets balance of £40m (2021: £45m) consists of cash deposits held to secure a charge over the
unfunded pension scheme obligations (see Note 7). Included in current restricted assets is £74m (2021: £111m) cash in respect
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.
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 from the financial investments have expired or
where the Group has transferred substantially all risks and rewards of ownership.
The Group has classified its financial investments into the following categories: at fair value through profit or loss, at fair value
through other comprehensive income (FVOCI) and at amortised cost.
Classification
Criteria and treatment under IFRS 9
Fair value
through profit or
loss
Debt and equity instruments where performance is managed and evaluated on a fair value basis and the objective is to
realise cash flows through the sale of the assets. The investments are carried at fair value, with gains and losses arising
from changes in this value recognised in the Consolidated Income Statement in the period in which they arise.
Fair value
through other
comprehensive
income
Non-derivative debt instruments where the contractual characteristics of the financial assets represent solely payments of
principal and interest and the objective is to hold the instrument to collect cash flows and sell, with a greater frequency
and value of sales than instruments at amortised cost. The investments are carried at fair value and fair value changes
are recognised in the Consolidated Statement of Comprehensive Income, except for interest and foreign exchange gains
or losses and impairment gains and losses that are derived using the same methodology that is applied to financial assets
measured at amortised cost, which are recognised in the Consolidated Income Statement. The cumulative gain or loss
that was recognised in other comprehensive income is recognised in the Consolidated Income Statement when a financial
asset at fair value through other comprehensive income is derecognised.
Amortised cost
Non-derivative debt instruments where the contractual characteristics of the financial assets represent solely payments of
principal and interest and the objective is to hold the instrument to collect cash flows over its life. Any disposals are
expected to be infrequent or insignificant. The investments are measured at amortised cost using the effective interest
method, less any impairment losses. Any discount or premium on purchase is amortised over the life of the investment in
the Consolidated Income Statement.
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. An analysis of ECL provisions is provided in Note 26.3.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
93
Financial investments are analysed as follows:
Carrying value
Fair value
Carrying value
Fair value
2022
2022
2021
2021
£m
£m
£m
£m
Fair value through profit or loss
Corporate debt securities and secured loans
301
301
334
334
Government debt securities
41
41
45
45
Pooled investment funds
459
459
386
386
Deposits with credit institutions
4
4
–
–
Other loans
7
7
7
7
Equities
32
32
13
13
Fair value through other comprehensive income
Corporate debt securities and secured loans
41
41
66
66
Government debt securities
19
19
30
30
Amortised cost
Corporate debt securities and secured loans
1,114
1,110
774
776
Government debt securities
468
468
211
214
Deposits with credit institutions
1,230
1,230
1,044
1,045
Other loans
–
–
1
1
Total financial investments
3,716
3,712
2,911
2,917
Non-current
756
752
831
833
Current
2,960
2,960
2,080
2,084
Fair value is a market-based measurement for assets for observable market transactions where market information might be
available. The objective of a fair value measurement is to estimate the price at which an orderly transaction to sell the asset or
to transfer the asset would take place between market participants at the measurement date under current market conditions
(i.e. an exit price at the measurement date from the perspective of a market participant that holds the asset).
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).
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
94
An analysis of the fair value of financial investments by hierarchy level is as follows:
Level 1
Level 2
Level 3
Total
£m
£m
£m
£m
2022
Fair value through profit or loss
Corporate debt securities and secured loans
21
279
1
301
Government debt securities
22
19
–
41
Pooled investment funds
89
347
23
459
Deposits with credit institutions
4
–
–
4
Other loans
–
–
7
7
Equities
–
–
32
32
Fair value through other comprehensive income
Corporate debt securities and secured loans
38
3
–
41
Government debt securities
19
–
–
19
Amortised cost
Corporate debt securities and secured loans
488
622
–
1,110
Government debt securities
290
178
–
468
Deposits with credit institutions
–
1,230
–
1,230
Total financial investments
971
2,678
63
3,712
Level 1
Level 2
Level 3
Total
£m
£m
£m
£m
2021
Fair value through profit or loss
Corporate debt securities and secured loans
36
297
1
334
Government debt securities
27
18
–
45
Pooled investment funds
96
277
13
386
Deposits with credit institutions
–
–
–
–
Other loans
–
–
7
7
Equities
–
–
13
13
Fair value through other comprehensive income
Corporate debt securities and secured loans
63
3
–
66
Government debt securities
30
–
–
30
Amortised cost
Corporate debt securities and secured loans
523
253
–
776
Government debt securities
109
105
–
214
Deposits with credit institutions
–
1,045
–
1,045
Other loans
–
1
–
1
Total financial investments
884
1,999
34
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.
In 2022, there were no transfers between fair value hierarchy levels. In 2021, £48m of government debt securities and
corporate debt securities and secured loans were transferred from Level 1 to Level 2 following a review of the level of market
activity and readily available quoted prices in those investments, £13m from Level 2 to Level 1 and £1m from Level 2 to Level 3.
Fair values for Level 2 assets mainly include values provided by external parties, including fund managers, which are either
from readily available prices (including last transaction price) but relate to assets for which the market is not always active, or
are measured on the basis of valuation techniques including a varying degree of assumptions supported by market transactions
and observable data.
The Group currently holds Level 3 investments totalling £63m. The majority of Level 3 investments are unlisted equities and
pooled investment funds valued at the recent subscription value and conversion price, which are considered to be unobservable
inputs. Reasonably possible changes to the valuation assumptions applied could result in a change in fair value of plus or
minus £3m.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
95
The table below shows movement in the Level 3 assets measured at fair value.
2022
2021
Level 3
£m
£m
At beginning of year
34
28
Additions
4
2
Net increase in fair value
24
4
Transfer between levels
–
1
Foreign exchange
1
(1)
At end of year¹
63
34
1.
All gains and losses are recognised in net financial expense in the Consolidated Income Statement.
There were no transfers in 2022. In 2021, transfers into Level 3 financial assets reflected changes in the availability of
observable inputs used in the valuation of those assets.
The Group uses a market interest curve supported by third parties as at the reporting date to discount financial assets,
borrowings and derivatives, where the fair value cannot otherwise be found from quoted market values. The interest rate used
is based on the duration of the financial asset/liability resulting in a range as follows:
2022
2021
%
%
Sterling assets and liabilities
3.4 - 3.7
0.9 - 1.1
Australian dollar assets and liabilities
3.3 - 3.7
0.3 - 1.4
Euro assets and liabilities
2.5 - 2.6
(0.7) - 0.2
US dollar assets and liabilities
3.9 - 4.6
Derivatives
A derivative is a financial instrument whose value is based on one or more underlying variables. The Group uses derivative
financial instruments to hedge its exposure to foreign exchange and interest rate risk. Derivatives are not held for speculative
reasons.
Derivative financial instruments are accounted for at fair value through profit or loss unless hedge accounting requires another
treatment. See Note 26 for details on how the Group accounts for derivatives that qualify for hedge accounting. Derivatives that
have been purchased or issued as part of a hedge that subsequently do not qualify for hedge accounting are accounted for at
fair value through profit or loss.
Fair values are obtained from market observable pricing information including interest rate yield curves.
Fair values have been calculated for each type of derivative as follows:
•
The fair value of currency forward contracts, swaps and options is determined using forward exchange rates derived
from market sourced data at the reporting date, with the resulting value discounted back to present value.
•
The fair value of interest rate swaps is determined as the present value of the estimated future cash flows based on
observable yield curves.
Valuation inputs are classified as Level 2 in the fair value hierarchy.
2022
2021
£m
£m
Derivative assets
Non-current
2
5
Current
26
36
Total derivative assets
28
41
Derivative liabilities
Non-current
(64)
(18)
Current
(73)
(17)
Total derivative liabilities
(137)
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
96
Deferred taxation assets and liabilities
Deferred taxation is an amount which recognises the differences between the carrying amounts of assets and liabilities for
financial reporting and the amounts used for taxation purposes. An example is the variance between the carrying value of
equipment due to depreciation being charged for financial reporting purposes and written down allowances being applied for the
relevant tax authorities.
Deferred taxation is recognised in full using the balance sheet liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The
following temporary differences are not recognised: goodwill not deductible for taxation purposes and the initial recognition of an
asset or liability in a transaction that is not a business combination and which, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss. The amount of deferred taxation recognised is based on the expected manner of
realisation or settlement of the carrying amount of assets and liabilities, using taxation rates enacted or substantively enacted at
the reporting date.
A deferred taxation asset is recognised only to the extent that it is probable that future taxable profits will be available against
which the asset can be utilised. Deferred taxation assets and liabilities are offset when they relate to income taxes levied by the
same taxation authority and when the Group can settle its current taxation assets and liabilities on a net basis.
Recognised deferred taxation assets and liabilities
Deferred taxation assets and liabilities are attributable to the following:
Assets
Liabilities
Net
2022
2021
2022
2021
2022
2021
£m
£m
£m
£m
£m
£m
Accelerated capital allowances
59
47
(38)
(28)
21
19
Post-employment benefits
3
3
(1)
(1)
2
2
Revaluation of properties to fair value
1
2
(87)
(104)
(86)
(102)
Employee benefits (other than post-
employment)
47
43
–
–
47
43
Provisions
147
143
(8)
(8)
139
135
Taxation value of losses carried forward
48
44
–
–
48
44
Goodwill and intangible assets
13
9
(136)
(207)
(123)
(198)
Other
17
14
(40)
(39)
(23)
(25)
Deferred taxation (before allowable netting)
335
305
(310)
(387)
25
(82)
Allowable netting of deferred taxation
(189)
(216)
189
216
–
–
Deferred taxation – net
146
89
(121)
(171)
25
(82)
Unrecognised deferred taxation assets
As at 31 December 2022, the Group had deductible temporary differences relating to trading losses of £190m (2021: £100m), to
capital losses of £80m (2021: £69m) and to other temporary differences of £9m (2021: £nil) for which no deferred taxation asset
was recognised due to uncertainty of utilisation of those temporary differences.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
97
Movement in net deferred taxation (liabilities)/assets
At beginning of
year
Initial
application of
IAS 29¹
Recognised in
Consolidated
Income
Statement
Recognised in
other
comprehensive
income
Acquisitions
through
business
combinations
Disposals
Foreign
exchange
At end of year
£m
£m
£m
£m
£m
£m
£m
£m
2022
Accelerated capital allowances
19
–
3
–
(1)
–
–
21
Post-employment benefits
2
–
–
–
–
–
–
2
Revaluation of properties to fair value
(102)
–
10
11
–
–
(5)
(86)
Employee benefits (other than post-
employment)
43
–
2
–
–
–
2
47
Provisions
135
–
(6)
–
–
–
10
139
Taxation value of losses carried forward
44
–
(1)
–
1
–
4
48
Goodwill and intangible assets
(198)
(6)
87
–
–
–
(6)
(123)
Other
(25)
–
(5)
1
–
–
6
(23)
Total
(82)
(6)
90
12
–
–
11
25
2021
Accelerated capital allowances
(11)
–
30
–
(1)
–
1
19
Post-employment benefits
2
–
–
(1)
1
–
–
2
Revaluation of properties to fair value
(89)
–
(23)
6
–
–
4
(102)
Employee benefits (other than post-
employment)
47
–
–
–
–
–
(4)
43
Provisions
131
–
16
–
1
–
(13)
135
Taxation value of losses carried forward
38
–
10
–
–
–
(4)
44
Goodwill and intangible assets
(194)
–
(13)
–
(2)
–
11
(198)
Other
(44)
–
10
–
–
4
5
(25)
Total
(120)
–
30
5
(1)
4
–
(82)
1.
Assets arising from insurance business
Financial assets arising from insurance business, excluding reinsurers' share of insurance provisions, and deferred acquisition
costs are held at amortised cost.
The valuation of reinsurers' share of insurance provisions is discussed in Note 19.
2022
2021
Note
£m
£m
Insurance debtors
(a)
1,334
1,116
Reinsurers’ share of insurance provisions
(b)
38
33
Deferred acquisition costs
(c)
175
143
Medicare rebate
(d)
71
73
Risk Equalisation Special Account recoveries
8
9
Total assets arising from insurance business
1,626
1,374
Non-current
7
7
Current
1,619
1,367
The above balance is held net of provision for impairment losses of
£27m (2021
:
£27m). Information regarding movement in
the provision and the ageing of insurance debtors, Medicare rebate and Risk Equalisation Special Account recoveries is shown
in Note 26.3.
a)
Insurance debtors
Insurance debtors primarily arise where the amount payable under an insurance contract is payable in instalments over the
term of the policy, with a debtor and corresponding unearned premium provision being established at inception for the total
premiums receivable over the whole period of cover.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
98
b)
Reinsurers’ share of insurance provisions
The recoverables due from reinsurers are shown within assets arising from insurance business and are assessed for
recoverability at each reporting date. Reinsurers’ share of insurance provisions are further analysed in Note 19.
c)
Deferred acquisition costs
Acquisition costs represent commissions payable and other expenses related to the acquisition of insurance contract revenues
recognised during the financial year. Acquisition costs that have been paid are deferred and recognised in the Consolidated
Income Statement in the period in which the benefit is recognised, on a straight-line basis. The movement in deferred
acquisition costs is as follows:
2022
2021
£m
£m
At beginning of the year
143
138
Initial application of IAS 29¹
6
–
Acquisition costs deferred
499
380
Acquisition costs recognised in the Consolidated Income Statement
(476)
(373)
Foreign exchange
3
(2)
At end of year
175
143
1.
Refer to Note 1.7 for details of the adjustments.
Acquisition costs recognised in the Consolidated Income Statement include £33m (2021: £19m) of deferred acquisition costs
written off due to deficiencies being identified in technical provisions as a result of liability adequacy testing. Further details on
liability adequacy testing are included within Note 19.
d)
Medicare rebate
In Australia, the government provides an income tested rebate to help people meet the cost of private health insurance. Where
customers have elected to receive the rebate as a premium reduction through their private health insurer, the amounts are
recovered from the government. Rebates due from the government but not received at the reporting date are recognised in
Inventories
Inventories comprise drugs, prostheses, consumables and housing stock utilised in the course of our care, health and dental
operations.
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in first-out method, or
methods that approximate this, and includes costs incurred in acquiring the inventories and in bringing them to their current
location and condition.
As at 31 December 2022, inventories were £91m (2021: £93m). Inventory write-downs of £4m were made during the year
(2021: £1m). The Group consumed £219m (2021: £221m) of inventories, which are recognised within other operating expenses
Trade and other receivables
Trade and other receivables arise in the ordinary course of business.
2022
2021
Note
£m
£m
Trade receivables
(a)
420
319
Amounts owed by Parent
50
24
Other receivables
(a)
224
122
Service concession receivables
(b)
71
30
Prepayments
112
71
Contract costs
4
5
Accrued income
58
47
Total trade and other receivables
939
618
Non-current
24
12
Current
915
606
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
99
Trade and other receivables are carried at amortised cost, net of provisions for ECLs. Trade receivables relate to consideration
due from customer contracts. All trade receivables and service concession receivables are classified as receivables under IFRS
15, as a receivable is an entity’s right to consideration that is unconditional, i.e. only the passage of time is required before
payment is due. Other receivables relate to consideration due from contracts that are outside the scope of IFRS 15, e.g. rental
receivables. Information regarding the ageing of trade and other receivables is shown in Note 26.3.
The carrying value of trade and other receivables is a reasonable approximation of fair value.
Financial assets comprise trade and other receivables and financial investments. Refer to Note 9 for financial investments.
All receivables are measured net of lifetime ECL. Where appropriate, a provision matrix is used to estimate ECL.
Under a provision matrix, receivables are grouped into customer segments and further divided into categories by age. Historical
credit loss experience and any relevant forward-looking information is then used to establish the ECL provision for each
category. An analysis of ECL provisions for trade and other receivables is disclosed in Note 26.3. All impairment losses are
recognised in the Consolidated Income Statement within net impairment on financial assets. Impairment losses on trade
(b) Service concession receivables
The Group has recognised service concession receivables in respect of a public–private partnership arrangement in Spain. A
financial asset is recognised to the extent that Bupa has an unconditional contractual right to receive cash at the direction of the
grantor for both the construction and operational services and the grantor has little, if any, discretion to avoid payment. This
financial asset is carried at amortised cost (using the effective interest method) less ECL provision.
In respect of operational services provided, revenue is recognised based on the average operating margin for the life of the
contract. The operating margin is based on historic performance plus projections and is reassessed based on changes in
expected performance, with an adjustment made to the current year results to bring the contract performance to date in line
with the revised margin. As revenue is based on an expected margin, with some potential variability, revenue is only ever
Cash and cash equivalents
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.
2022
2021
£m
£m
Cash at bank and in hand
1,141
1,247
Short-term deposits
262
492
Total cash and cash equivalents
1,403
1,739
Bank overdrafts of £2m (2021: £1m) that are repayable on demand are reported within other interest-bearing liabilities in the
Consolidated Statement of Financial Position. Demand deposits that have restrictions on use set by a third party that
fundamentally change the nature of the demand deposits are reported within restricted assets in the Consolidated Statement of
Financial Position. Both of these are considered as components of cash and cash equivalents for the purpose of the
Assets and liabilities held for sale
Non-current assets or disposal groups comprising assets and liabilities are classified as held for sale if it is highly probable that
their carrying amount will be recovered primarily through sale rather than continuing use and a sale within 12 months is
considered to be highly probable.
Classification as held for sale
Assets held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Subsequent to initial
classification as held for sale, any impairment losses and gains or losses on remeasurement are recognised in the
Consolidated Income Statement.
On classification as held for sale, intangible assets and property, plant and equipment are no longer amortised or depreciated.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
100
Assets and liabilities classified as held for sale
2022
2021
£m
£m
Assets held for sale
Goodwill and intangible assets
–
17
Property, plant and equipment
31
20
Investment property
1
–
Trade and other receivables
–
1
Total assets classified as held for sale
32
38
Liabilities associated with assets held for sale
Lease liabilities
–
(2)
Provisions for liabilities and charges
(1)
(1)
Trade and other payables
–
(1)
Total liabilities classified as held for sale
(1)
(4)
Net assets classified as held for sale
31
34
Net assets held for sale as at 31 December 2022 predominantly comprise a number of care homes within Bupa UK Care
Services, Bupa Villages and Aged Care New Zealand and Bupa Villages and Aged Care Australia, as well as an office within
Care Plus in Brazil. Net assets held for sale as at 31 December 2021 primarily comprised the Dental Corporation New Zealand
business, the Dental Corporation Australia's 'Dental Lounge' business and a number of care homes and assets within Bupa
Borrowings
The Group has various sources of funding including subordinated bonds, senior unsecured bonds and loans.
Borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, they are
held at amortised cost, with any difference between the initial recognition value and redemption value being recognised in the
Consolidated Income Statement over the period of the borrowings on an effective interest basis.
The Group uses interest rate swaps to manage its interest rate risk on certain borrowings under fair value hedges. Changes in
the fair value of swaps designated and qualifying as fair value hedge are recorded in the Consolidated Income Statement
together with changes in the fair value of the borrowings, due to the hedged risk. A gain or loss relating to any ineffective portion
is directly recognised in the Consolidated Income Statement.
2022
2021
Note
£m
£m
Subordinated liabilities
Subordinated unguaranteed bonds
(a)
998
997
Total subordinated liabilities
998
997
Other interest-bearing liabilities
Senior unsecured bonds
(b)
600
642
Fair value adjustment in respect of hedged interest rate risk
(60)
(16)
Bank loans and overdrafts
(c)
108
196
Total other interest-bearing liabilities
648
822
Total borrowings
1,646
1,819
Non-current
1,287
1,623
Current
359
196
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
101
Subordinated liabilities
Other interest-bearing
liabilities
Total
2022
2021
2022
2021
2022
2021
£m
£m
£m
£m
£m
£m
At beginning of year
997
1,247
822
1,191
1,819
2,438
Arising on business combinations
–
–
1
2
1
2
Net repayments
–
(250)
(141)
(322)
(141)
(572)
Interest payments
(47)
(58)
(17)
(25)
(64)
(83)
Accrued interest and amortisation
48
58
19
24
67
82
Fair value adjustment in respect of hedged risk
–
–
(44)
(28)
(44)
(28)
Foreign exchange
–
–
8
(20)
8
(20)
At end of year
998
997
648
822
1,646
1,819
(a) Subordinated unguaranteed bonds
The total carrying value of subordinated unguaranteed bonds, net of accrued interest, capitalised issue costs and discounts,
was £998m (2021: £997m).
On 24 September 2021, the Company early redeemed £250m of £500m unguaranteed subordinated bonds originally due to
mature on 25 April 2023. Maturity of the remaining £250m portion is unchanged and interest is payable on the bonds at 5.00%
per annum. In the event of the winding up of the Company the claims of the bondholders are subordinated to the claims of other
creditors of the Company.
On 25 June 2020, the Company issued £350m of unguaranteed subordinated bonds which mature on 14 June 2035. Interest is
payable on the bonds at 4.125% per annum. In the event of the winding up of the Company the claims of the bondholders are
subordinated to the claims of other creditors of the Company.
On 8 December 2016, the Company issued £400m of unguaranteed subordinated bonds which mature on 8 December 2026.
Interest is payable on the bonds at 5.000% per annum. In the event of winding up of the Company the claims of the
bondholders are subordinated to the claims of other creditors of the Company.
(b) Senior unsecured bonds
On 13 April 2022, Bupa Chile early redeemed £47m of inflation-linked senior unsecured bonds that were issued on 30 June
2012 and originally due to mature on 30 June 2033. This led to a loss of £6m charged to the Consolidated Income Statement
within financial expenses (see Note 2.5).
On 17 June 2021, the Company repaid £350m of senior unsecured bonds. Interest was payable on the bonds at 3.375% per
annum.
On 25 June 2020, the Company issued £300m of senior unsecured bonds, guaranteed by the Parent, which mature on 14 June
2027. Interest is payable on the bonds at 1.750% per annum. The total hedged fair value of these £300m senior unsecured
bonds, including accrued interest, capitalised issue costs and discounts is £252m (2021: £284m). The valuation adjustment is
the change in value arising from interest rate risk which is matched by the fair value of swap contracts in place to hedge this
risk.
On 5 April 2017, the Company issued £300m of senior unsecured bonds, guaranteed by the Parent, which mature on 5 April
2024. Interest is payable on the bonds at 2.000% per annum. The total hedged fair value of these £300m senior unsecured
bonds, including accrued interest, capitalised issue costs and discounts, is £288m (2021: £298m). The valuation adjustment is
the change in value arising from interest rate risk which is matched by the fair value of swap contracts in place to hedge this
risk.
See Note 26.2.2 for details on the Group's interest rate hedging activities.
Bank loans and overdrafts are £108m (2021: £196m), which includes a portfolio of loans held in Bupa Chile totalling £33m
(2021: £38m), loans held in Grupo Bupa Sanitas S.L. of £3m (2021: £nil) and a tri syndicated loan held in Especializada y
Primaria L’Horta-Manises S.A.U. (part of Sanitas Hospitales and New Services) of £2m (2021: £8m).
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
102
In December 2021, the Group entered into a £900m revolving credit facility which had an initial maturity of December 2026 with
two, one-year extension options. The facility replaced an £800m revolving credit facility and a separate £40m bilateral facility. In
November 2022, the facility was extended by the first of the two options with the maturity date for the facility now December
2027. The second optional extension is in November 2023. The facility was drawn down by £70m as at 31 December 2022
(2021: £150m drawn down). Drawings under the £900m facility are guaranteed by the Company. The overdraft facilities are
subject to cross guarantees within the Group. The bank loans and overdrafts bear interest at commercial rates linked to SONIA
The fair value of a financial liability is defined as the amount for which a financial liability could be exchanged in an arm’s-length
transaction between informed and willing parties. Fair values of subordinated liabilities and senior unsecured bonds are
calculated based on quoted prices.
The fair values of quoted liabilities in active markets are based on current offer prices. The fair values of financial liabilities for
which there is no active market are established using valuation techniques. These may include reference to the current fair
value of other instruments that are substantially the same and discounted cash flow analysis.
Financial liabilities are categorised into a three-level fair value hierarchy as described in Note 9. 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:
2022
2021
Level 1
Level 2
Total
Level 1
Level 2
Total
£m
£m
£m
£m
£m
£m
Subordinated liabilities
906
–
906
1,104
–
1,104
Senior unsecured bonds
545
–
545
608
44
652
Bank loans and overdrafts
2
106
108
–
196
196
Total fair value
1,453
106
1,559
1,712
240
1,952
Leases
Leases are contracts that convey the right to use an asset for a period of time in exchange for consideration. The majority of the
Group’s leases relate to properties.
The Group’s leases primarily relate to hospitals, care homes, clinics and office buildings. Lease terms are negotiated on an
individual basis and contain a wide range of different terms and conditions. Property leases often include extension and
termination options, open market rent reviews, indexation uplifts or fixed uplifts.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the individual lessee company’s incremental borrowing rate taking into account the duration of the lease. The
lease liability is subsequently measured at amortised cost using the effective interest method, with the finance cost charged to
the Consolidated Income Statement over the lease period so as to produce a constant periodic rate of interest on the remaining
balance of the liability. It is remeasured when there is a change in future lease payments arising from a change in index or rate,
or if the Group changes its assessment of whether it will exercise an extension or termination option. The lease liability is
recalculated using a revised discount rate if the lease term changes as a result of a modification or reassessment of an
extension or termination option.
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any
lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to
restore properties to their original condition, less any lease incentives received. The right-of-use asset, excluding restoration
costs, is typically depreciated on a straight-line basis over the lease term. In addition, the right-of-use asset may be adjusted for
certain remeasurements of the lease liability, such as indexation and market rent review uplifts. Restoration costs included in
the right-of-use asset are amortised over the same term as the corresponding provision, which may be longer than the IFRS 16
contractual lease term where occupancy of the property is expected to be longer than the existing contract. The movement of
the right-of-use asset is disclosed in Note 4.
The Group has elected not to recognise the right-of-use assets and lease liabilities for short-term leases that have a term of 12
months or less or leases that are of low value (£4,000 or less). Lease payments associated with these leases are expensed on
a straight-line basis over the lease term.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
103
2022
2021
Lease liabilities
£m
£m
At beginning of the year
915
1,010
Additions arising on business combinations
4
2
Additions
51
50
Disposals
(1)
(10)
Remeasurement
56
39
Interest on lease liabilities
46
47
Repayments
(181)
(177)
Transfer to liabilities associated with assets held for sale
–
(2)
Foreign exchange
36
(44)
At end of year
926
915
Non-current
795
788
Current
131
127
See Note 26.4 for maturity analysis of lease liabilities.
Expenses
The Consolidated Income Statement includes expenses relating to short-term leases of £4m (2021: £5m) and expenses relating
to leases of low-value assets of £1m (2021: £1m). Depreciation of right-of-use assets is reported in Note 4. Interest on lease
liabilities is reported within financial expenses (see Note 2.5).
Extension options
Some property leases in the Group contain extension options exercisable by the lessee before the end of the non-cancellable
contract period. The periods covered by extension options are only included in the lease term if the lessee is reasonably certain
to exercise the options. At lease commencement an assessment is performed of whether it is reasonably certain to exercise the
extension options, taking into account factors like the future timing of options, economic incentives for the lessee to exercise the
option or the lessee's past practice. The Group reassesses whether it is reasonably certain to exercise the extension option if
there is a significant event or change in circumstances within its control.
As at 31 December 2022, potential discounted future cash outflows of £358m (2021: £347m) have not been included within
lease liabilities because it is not reasonably certain that the related extension options will be exercised.
Termination options
A number of lease contracts in the Group contain termination options. Periods covered by a termination option are only included
in the lease term if the lessee is reasonably certain not to exercise the option.
As at 31 December 2022, potential discounted future cash outflows of £60m (2021: £52m) have not been included within lease
liabilities because it is not reasonably certain that the related termination options will not be exercised.
Future lease commitments
The Group is committed to leases that have not yet commenced to the value of £10m as at 31 December 2022 (2021: £26m).
Variable lease payments
Some leases, predominantly of care home properties in Spain, contain variable lease payments that are based on earnings.
The future potential cash flows arising from variable lease payments not included in the lease liability are estimated at £23m
Provisions arising from insurance contracts and other liabilities arising from insurance business
The provisions arising from insurance contracts and other liabilities arising from insurance business arise from the Group’s
underwriting activities. The provisions mainly relate to unearned premiums, which are deferred revenues that relate to future
periods; and claims, where an estimate is made of the expense required to settle existing obligations to insurance customers.
The other liabilities primarily consist of obligations to repay deposits and commissions payable.
19.1
Provisions arising from insurance contracts
Provisions for unearned premiums
The unearned premium provision represents premiums written that relate to periods of risk in future accounting periods. It is
calculated on a straight-line basis, which is not materially different from a calculation based on the pattern of incidence of risk.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
104
In circumstances where a return of premiums is likely to be due to policyholders, a provision for the return of premium is
established within the provision for unearned premiums. The return of premium provision is treated as an adjustment to the
initial premium, reducing gross premium income. A provision for return of premiums was established in 2020 in respect of Bupa
Insurance Limited following the commitment to pass back to eligible customers any exceptional financial benefits experienced
by the UK PMI business that ultimately arose as a result of the COVID-19 pandemic. As at 31 December 2022, the return of
premium provision is estimated to be £59m (2021: £71m). The reduction in the provision reflects a decrease in the best
estimate of the exceptional financial benefit to be returned to eligible customers due to a higher rebound of claims. The
provision closed to future accrual of benefit from 31 December 2021.
The return of premium provision reflects the best estimate of exceptional financial benefit ultimately arising from COVID-19
during the period 23 March 2020 to 31 December 2021. It is calculated by estimating the ultimate net reduction in claims costs
due to the disruption caused by COVID-19, adjusted to take account of incremental costs and profit impacts attributable to
COVID-19, the estimated costs of deferred claims expected to rebound after the reporting date and rebate payments made in
2021 of £110m. The key assumptions in determining the return of premium provision are the costs of deferred claims expected
to rebound, which has reduced in the level of estimation uncertainty since 2021, and COVID-19 related claims inflation
expected to be incurred (£24m). It is expected that the deferred claims will be incurred over 2023. The assumed level of
deferred claims within the rebate is sensitive to the cost of healthcare and customer behaviour. A reasonably possible increase
or decrease in this assumption results in a decrease/increase in the provision of £8m and an increase/decrease in profit before
taxation by the same amount.
Provisions for unearned premiums also includes a provision of £45m (2021: £nil) for a premium rate increase deferral in respect
of the health insurance business in Australia. In accordance with local accounting standards and IFRS 4 Insurance Contracts, a
premium rate increase deferral provision is recognised at the point the Group announces a return to policyholders which will be
honoured through a rate deferral, and gross written premiums recognised within the Consolidated Income Statement are
reduced accordingly. The provision is subsequently utilised over the period when the rate deferral is effective. At the reporting
date the amounts provided for are in relation to the announcements made by the Group in December 2022 to return permanent
net COVID-19 savings to eligible policyholders.
Unexpired risk provision
Liability adequacy tests are performed at a portfolio level for the Group’s insurance entities. For short-duration contracts, a
premium deficiency is recognised if the sum of expected costs of future claims and claim adjustment expenses, capitalised
deferred acquisition costs, and maintenance expenses exceeds the corresponding unearned premiums while considering
anticipated investment income. Any identified deficiency is charged to the Consolidated Income Statement, initially by writing off
deferred acquisition costs, and subsequently by establishing an unexpired risk provision for losses arising in excess of deferred
acquisition costs.
As at 31 December 2022, an unexpired risk provision of £1m has been recognised (2021: £22m).
Provision for claims
The gross provision for claims represents the estimated liability arising from claims episodes in current and preceding financial
years which have not yet given rise to claims paid. A claims episode is an insured medical service that the Group has an
obligation to fund which could be consultation fees, diagnostic investigations, hospitalisation or treatment costs. The provision
includes an allowance for claims management and handling expenses. The gross provision for claims also includes a deferred
claims provision for claims episodes that have not taken place by the reporting date where the Group has a constructive
obligation to fund deferred medical services, due to regulatory or other public commitments following periods of severe service
disruption, as has been the case with COVID-19.
The gross provision for claims across the Group is set in line with Bupa’s claims reserving standards, at a level to achieve an
appropriate probability of sufficiency and is estimated based on current information and the ultimate liability may vary as a result
of subsequent information and events.
Adjustments to the amount of claims provision for prior years are included in the Consolidated Income Statement in the financial
year in which the change is made. In setting the provisions for claims outstanding, a best estimate is determined on an
undiscounted basis and then a margin of prudence is added such that there is confidence that future claims will be met from the
provisions. The level of prudence is set based on the historic accuracy of initial estimation to ultimate claims, in order to mitigate
the degree of uncertainty attached to the underlying provision to an appropriate degree of confidence. The level of prudence is
set at a Group level, allowing the Group to benefit from a diversification benefit on the prudence margin held by the individual
insurance entities in the Group.
The expected claims are calculated having regard only to contracts commencing prior to the reporting date. The methods used
and estimates made for claims provisions are reviewed regularly.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
105
A deferred claims provision of £181m has been recognised as at 31 December 2022 (2021: £163m) in respect of the health
insurance business in Australia, where the Australian prudential regulator (APRA) had mandated the need to provide for the
rebound of claims following the ongoing COVID-19 disruption. Australia continued to experience ongoing disruption to the
supply of local health provision during the year. From 1 October 2022, the provision closed to future accrual of deferred claims
as the health provision restrictions no longer applied.
The estimated cost of claims expected to rebound after the reporting date has been calculated as a proportion (the deferral
rate) of the observed shortfall in incurred claims across the period of disruption, compared with pre-COVID-19 expectations. As
at 31 December 2022, the estimated amount represents 55% of the shortfall in hospitalisation claims in the period since 1
January 2022, compared with expected claims. This has been recognised on a best estimate basis, together with an allowance
for claims handling costs and an additional risk margin. Related future claims experience may differ significantly from these
estimates.
The key assumption in determining the deferred claims is the assumed deferral rate. A reasonably possible increase in the
deferral rate of 10% would reduce profit before taxation by £23m. A decrease in the assumption by the same amount would
have the opposite impact.
2022
2021
Gross
Reinsurance
Net
Gross
Reinsurance
Net
£m
£m
£m
£m
£m
£m
General insurance business
Provisions for unearned premiums
2,444
(26)
2,418
2,104
(24)
2,080
Provision for claims
1,264
(12)
1,252
1,093
(9)
1,084
Long-term business
Life insurance contract liabilities¹
1
–
1
36
–
36
Total insurance provisions
3,709
(38)
3,671
3,233
(33)
3,200
Non-current
63
–
63
50
–
50
Current
3,646
(38)
3,608
3,183
(33)
3,150
1.
The decrease in the period is due to the sale of the portfolio of life insurance in Bupa Global Latin America, as described in Note 24.
Reinsurers’ share of insurance provisions is included within Note 12.
(i)
Analysis of movements in provisions for unearned premiums
2022
2021
Gross
Reinsurance
Net
Gross
Reinsurance
Net
£m
£m
£m
£m
£m
£m
At beginning of year
2,104
(24)
2,080
2,094
(17)
2,077
Initial application of IAS 29¹
4
–
4
–
–
–
Additions arising on business combinations
–
–
–
9
–
9
Premiums deferred
10,274
(137)
10,137
9,354
(109)
9,245
Movement in rate deferral provision
45
–
45
–
–
–
Movement in return of premium provision
(12)
–
(12)
(74)
–
(74)
Deferred premiums released to income
(10,029)
132
(9,897)
(9,228)
102
(9,126)
Increase in unexpired risk provision
(19)
–
(19)
19
–
19
Disposal of subsidiary
–
1
1
–
–
–
Foreign exchange
77
2
79
(70)
–
(70)
At end of year
2,444
(26)
2,418
2,104
(24)
2,080
1.
Refer to Note 1.7 for details of the adjustments.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
106
(ii)
Analysis of movements in provisions for claims
2022
2021
Gross
Reinsurance
Net
Gross
Reinsurance
Net
£m
£m
£m
£m
£m
£m
At beginning of year
1,093
(9)
1,084
1,083
(7)
1,076
Additions arising on business combinations
–
–
–
3
–
3
Increase for current year claims
7,782
(97)
7,685
7,386
(79)
7,307
Cash paid to settle claims
(7,661)
94
(7,567)
(7,266)
76
(7,190)
Decrease for prior year claims
(22)
–
(22)
(33)
1
(32)
Movement in deferred claims provision
9
–
9
1
–
1
Foreign exchange
63
–
63
(81)
–
(81)
At end of year
1,264
(12)
1,252
1,093
(9)
1,084
Assumptions for general insurance business
The process of recognising liabilities arising from general insurance entails the estimation of future payments to settle incurred
claims and associated claims handling expenses, as well as assessing whether additional provisions for unexpired risk are
required. The principal assumptions in the estimation of the liability relate to the expected frequency, severity and settlement
patterns of insurance claims, which are expected to be consistent with recently observed experience and trends. The aim of
claims reserving is to select assumptions and reserving methods that will produce the best estimate of the future cash outflows
for the subject claims; it is an uncertain process which also requires judgements to be made. The resulting provisions for
outstanding claims incorporate a margin for adverse deviation, over and above the best estimate liability, the quantum of which
reflects the level of this uncertainty.
Claims development patterns are analysed in each of the Group’s insurance entities. Where distinct sub-portfolios with different
claims cost and development characteristics exist, further analysis is undertaken to derive assumptions for reserving that are
appropriate and can be applied to relatively homogeneous groups of policies. Such sub-portfolios may be defined by product
line, risk profile, geography or market sector. Various established reserving methods for general insurance are considered,
typically basic chain ladder, Bornhuetter-Ferguson and pure risk cost methods. Additional consideration is given to the
treatment of large claims, claim seasonality, claims inflation and currency effects, for which appropriate adjustments to
assumptions and methods are made.
While there is some diversity in the development profile of health insurance claims across the Group, such claims are generally
highly predictable in both frequency and average amount, and claims are settled quickly following the medical event for which
benefit is claimed. Medical expense claims are, typically, substantially fully-settled within just a few months.
Insurance provisions are inevitably estimates. Actual experience of claims costs and/or administrative expenses may vary from
that anticipated in the reserving estimates. Deferred claims provisions that have been recognised because the Group has a
constructive obligation to reserve for deferred claims are calculated separately from the base outstanding claims provision.
The following table shows the impact on profit before taxation of reasonably possible variations in assumptions in the carrying
value of insurance contract liabilities at the end of the reporting period:
Increase in claims
Increase in
expenses
2022
Change in variable
5%
10%
Reduction in profit net of reinsurance before taxation¹
£32m
£2m
2021
Change in variable
5%
10%
Reduction in profit net of reinsurance before taxation¹
£32m
£2m
1.
The deferred claims provision of £181m (2021: £163m) has been excluded from this sensitivity.
These variances would reduce the amount of profit before taxation that would otherwise emerge in subsequent periods.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
107
19.2
Other liabilities arising from insurance business
Other liabilities arising from insurance business consist of payables to insurance creditors.
2022
2021
£m
£m
Reinsurers' deposits
9
8
Reinsurance creditors
77
61
Commissions payable
42
39
Other insurance payables
93
105
Total other liabilities arising from insurance business
221
213
Included within other insurance payables is £38m (2021: £57m) related to announced and yet to be paid cash givebacks
associated with the return of COVID-19 savings to customers of Bupa Health Insurance, Australia.
20
Provision for liabilities and charges
A provision is recognised when the Group is expected to make future payments as a result of a past event.
These payments can result from a legal obligation or a constructive obligation, where an expectation has been created by the
Group. A provision is made where an outflow of resources is probable and where the payments can be reliably estimated. If the
effect is material, provisions are determined by discounting the estimated future payments at a pre-taxation rate that reflects a
current market assessment of the time value of money and, where appropriate, the risks specific to the liability.
Although provisions are made where payments can be reliably estimated, the amounts provided are based on a number of
assumptions which are inherently uncertain and therefore the amounts that are ultimately paid could differ from the amounts
recorded.
Long service
and annual
leave
Customer
remediation and
legal provisions
Provision for
underpayment
of employee
entitlement
Property
restoration
provision
NHS dental
contract
clawback
provision
Other
Total
£m
£m
£m
£m
£m
£m
£m
At beginning of year
95
16
62
27
21
49
270
Interest on obligations
–
–
–
2
–
–
2
Charge for year
55
8
5
3
47
39
157
Released in year
(21)
(8)
(7)
–
(1)
(21)
(58)
Utilised in year
(34)
(1)
(22)
(2)
(17)
(13)
(89)
Transfer to liabilities held for sale
(1)
–
–
–
–
–
(1)
Foreign exchange
3
1
3
–
–
2
9
Total provisions for liabilities
and charges
97
16
41
30
50
56
290
Non-current
22
9
–
23
–
22
76
Current
75
7
41
7
50
34
214
Long service and annual leave
The long service leave provision relates to territories where employees are legally entitled to substantial paid leave after
completing a certain length of qualifying service. Uncertainty around both the amount and timing of future outflows arises as a
result of variations in employee retention rates, which may vary based on historical experience. The annual leave provision
relates to territories where the annual entitlement of leave is not required to be taken within a predetermined time nor does it
expire. Therefore, uncertainty exists around the timing of future outflows as well as around the amount of future outflows due to
wage inflation.
Customer remediation and legal provisions
Customer remediation provisions relate to the costs of compensating customers for losses or damages associated with a failure
to comply with regulations or to treat customers fairly. Legal provisions relate to potential and ongoing legal claims and
represent the discounted fair value of total estimated liabilities. Due to the nature of these provisions, the timing and potential
cost are uncertain.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
108
Provision for underpayment of employee entitlement
In 2021, a provision was established in respect of underpayments of employee entitlements affecting some current and former
employees, following an extensive proactive pay compliance review carried out in Australia and New Zealand. The Group
anticipates that the remaining remediation payments will be made during 2023.
Property restoration provisions
Property restoration provisions relate to the estimate of costs to be incurred by the Group in its capacity as a lessee, when
dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the
condition required by the terms and conditions of the lease. Due to potential future renewals of leases, the timing and potential
cost are uncertain.
NHS dental contract clawback provision
A provision is held in respect of amounts that are expected to be deducted from future NHS contracts held by Bupa Dental Care
UK, as a result of not meeting required treatment targets set by the NHS in the current contract period.
Other provisions include regulatory provisions relating to levies payable to the Group’s various regulators,
contract-related
provisions
,
provisions for legal costs and other smaller provisions, along with contingent consideration related to earn-out
Trade and other payables
Trade and other payables arise in the ordinary course of business.
2022
2021
Note
£m
£m
Accruals
697
678
Refundable accommodation deposits
(a)
455
449
Amounts owed to Parent
119
100
Trade payables
268
242
Other payables
267
229
Occupational right agreement liabilities
(b)
374
302
Deferred income and deferred revenue
(c)
107
116
Social security and other taxes
66
54
Total trade and other payables
2,353
2,170
Non-current
23
36
Current
2,330
2,134
Trade and other payables (excluding deferred revenue) are carried at amortised cost. The carrying value of trade and other
payables is a reasonable approximation of their fair value. Information regarding the maturity of trade payables, other payables,
occupational rights agreement liabilities, refundable accommodation deposits and accruals is shown in Note 26.4.
(a) Refundable accommodation deposits
Refundable accommodation deposits are non-interest-bearing deposits paid by some residents of care homes held in Bupa
Aged Care Australia as payment for a place in the care home facility. These deposits are repayable at any time when the
resident leaves the facility and are therefore not discounted. The deposits are recorded as the proceeds received, net of
amounts deducted at the election of the resident.
(b) Occupational right agreement liabilities
Occupational right agreement liabilities represent the amount payable to a resident on termination of the resident's occupation
rights to an independent living unit in a retirement village in New Zealand or Australia. The liability varies according to the
agreement with the resident. Changes in the value of the liability are recorded as an expense in the Consolidated Income
Statement. Residents have the right to cancel their residency agreement with the Group at any time. As such, the liability is not
discounted but is recognised as a current liability in the Consolidated Statement of Financial Position. Occupational right
agreement liabilities are held net of deferred management fees and amenities fees receivable.
The total balance of £107m (2021: £116m) includes £79m (2021: £81m) of deferred revenue under IFRS 15, related primarily to
care home government funding received in advance. The liability is released and recognised as revenue as the services are
provided and the performance obligations are satisfied.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
109
Changes in this deferred revenue balance during the year are as follows:
2022
2021
restated¹
£m
£m
At beginning of year
81
74
Revenue recognised
(390)
(356)
Revenue deferred
384
366
Foreign exchange
4
(3)
At end of year
79
81
1.
A correction has been made to the 2021 revenue recognised in the period and deferred revenue in the period, increasing the balances by £201m to reflect the
gross up of government funding received.
Revenue recognised includes £75m (2021: £65m) of revenue that was deferred at the beginning of the year. £72m (2021:
£75m) of revenue deferred as at 31 December 2022 will be recognised during 2023 as the performance obligations are
Restricted Tier 1 (RT1) notes
The RT1 notes meet the classification of equity and are presented as a separate category of equity in the Consolidated
Statement of Financial Position at an amount equal to the proceeds of issue less transaction costs. RT1 coupons are
recognised directly in the Consolidated Statement of Changes in Equity, net of tax, upon payment.
2022
2021
£m
£m
Restricted Tier 1 notes
297
297
On 24 September 2021, the Company 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 year was £12m (2021: £nil).
The RT1 notes are perpetual, with no fixed maturity or redemption date. The notes have a first call date of 24 March 2032 and
interest is payable at the sole and absolute discretion of the Company, with cancelled interest providing no rights to the holder
of the notes nor being considered a default. The RT1 notes are therefore treated as equity. The notes are convertible to share
Share capital
2022
2021
£m
£m
Allocated, called-up and fully paid
200,050,000 ordinary shares of £1 each
200
Business combinations and disposals
A business combination refers to the acquisition of a controlling interest in a business, which is further defined as an integrated
set of activities and assets that is capable of being conducted and managed for the purpose of providing economic benefits to
the owners. A disposal refers to the sale of a subsidiary.
Business combinations are accounted for using the acquisition method. Identifiable assets and liabilities acquired and
contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Any
non-controlling interests are recognised as a proportionate share of the acquiree’s net identifiable assets.
The identification and valuation of intangible assets arising on business combinations is subject to a degree of estimation and
judgement. We engage independent third parties to assist with the identification and valuation process. In valuing these
intangible assets, market-accepted methodologies have been applied. Customer relationships are valued using methodologies
such as the Multi-Period Excess Earnings Method (where the value of an intangible asset is equal to the present value of the
after-tax cash flows attributable only to that intangible asset). Brands and trademarks are valued using methodologies such as
the Relief from Royalty Method (applying an estimated royalty rate to the projected sales relating to each asset over the
economic life).
The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable assets acquired is recorded as
goodwill.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
110
Acquisition accounting must be completed within 12 months of the transaction date.
Costs related to the acquisition are expensed as incurred.
(a)
2022 acquisitions
During the year, the Group made acquisitions for a total consideration of £23m, recognising net assets on acquisition of £9m.
Acquisitions with a total consideration of £13m were made in Poland over the course of the year as the Group continued to
expand its presence in the region. This included the acquisition of Med-Polonia Sp. z.o.o in April 2022 for a consideration of
£7m. Total net assets of £4m were recognised in respect of the acquisitions along with associated goodwill of £9m.
In addition, in November 2022, the Group acquired Bité Medica Hospital in Mexico for a consideration of £9m. Net assets of
£5m and resulting goodwill of £4m were recognised on acquisition.
There was an adjustment to goodwill and consideration in respect of the prior year Citomed acquisition. Both goodwill acquired
and consideration increased by £1m.
Included in the Group Consolidated Income Statement is revenue of £5m and a loss 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 2022,
revenue of £14m and a loss before taxation of £2m would have been recorded by the Group for the year ended 31 December
2022.
The following table summarises acquisitions recognised during the year:
Fair value
£m
Intangible assets
7
Property, plant and equipment
9
Cash and cash equivalents
1
Trade and other receivables
2
Other interest-bearing liabilities
(5)
Trade and other payables
(5)
Net assets acquired
9
Net assets acquired
9
Goodwill
14
Consideration
23
Consideration satisfied by:
Cash
23
Total consideration paid
23
Purchase consideration settled in cash
23
Cash acquired on acquisition
(1)
Net cash outflow on acquisition
22
Settlement of deferred and contingent consideration
7
Net cash outflow associated with acquisitions
29
(b)
2022 disposals
In June 2022, the Group sold its portfolio of life insurance in Bupa Global Latin America to a third party for £(3)m, realising a net
loss on disposal of £3m. In June 2022 the Group
closed the Bupa representative office in China, resulting in a net loss on
disposal of £4m. Other minor disposals in the year included individual dental businesses and care homes in New Zealand,
Australia and the UK resulting in a net gain on disposal of £3m.
(c)
2021 acquisitions
In January 2021, the Group acquired Vitamedica, a health insurance provider in Mexico, for a consideration of £16m. Net
assets of £11m and resulting goodwill of £5m were recognised on finalisation of the acquisition balance sheet in 2021.
In addition, the Group acquired the business and membership of Civil Service Healthcare Society Limited (CS Healthcare) in
January 2021 for £nil consideration. Intangible assets consisting of customer relationships totalling £26m and other net assets
totalling £16m were recognised as part of the business combination. The resulting gain of £42m was recorded as a gain on
acquisition of businesses within other income and charges (see Note 2.4). This is gross of related transaction costs of £2m.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
111
Further acquisitions were made in Poland for a total consideration of £32m of which £10m was deferred, largely to expand the
Group’s presence in outpatient clinics, diagnostic centres and hospitals. These included the acquisition of Citomed, an operator
of outpatient facilities, diagnostic laboratories and a multi-specialist hospital in October, for a consideration of £19m; as well as
the acquisition in September of an 88.7% controlling interest in Swissmed, a multi-specialist hospital for consideration of £11m.
Total net assets of £9m were recognised for these acquisitions, with associated goodwill of £23m.
Included in the Group Consolidated Income Statement for the year ended 31 December 2021 is revenue of £37m and a profit
before taxation of £5m in relation to those businesses acquired in 2021. If the acquisition date of the businesses acquired
during the year had been 1 January 2021, revenue of £12,919m and a profit before taxation of £538m would have been
recorded by the Group for the year ended 31 December 2021.
(d)
2021 disposals
During 2021
the Group disposed of its 70% stake in a provision business in Spain for a consideration of £51m, realising a net
£1m loss on disposal.
The Group also completed the sale of its rehabilitation business in New Zealand, realising a gain on disposal of £5m, and
realised a £3m gain on disposal of an equity-accounted investment in Australia.
Within aged care, the Group disposed of care homes businesses in Sanitas Mayores for a consideration of £11m resulting in a
gain on disposal of £3m, while Bupa Villages and Aged Care Australia disposed of care homes for a consideration of £33m,
Capital management
The Parent, Bupa, is a company limited by guarantee, with no shareholders. It is funded through retained earnings and
borrowings. Bupa's capital management objective is to maintain sufficient capital to protect the interests of its customers,
investors, regulators and trading partners while deploying capital efficiently and managing risk to enable Bupa to continue to
deliver its purpose in a sustainable manner. All profits are reinvested to develop Bupa's business for the benefit of current and
future customers.
The Solvency II framework, which governs industry regulation and prudential capital requirements within the European Union
and the UK, became effective from 1 January 2016. Bupa has prepared its reporting in line with the requirements of the SII
regime, as enacted in the UK, following the UK's exit from the European Union.
Bupa is subject to the requirements of Solvency II and it must hold sufficient capital to cover its Group Solvency Capital
Requirement (SCR), which takes account of the risks in Bupa, including those related to non-insurance businesses.
Bupa's SCR is calculated in accordance with the Standard Formula specified under Solvency II. Bupa has obtained approval
from the PRA to substitute the insurance premium risk parameter in the Standard Formula with a Group Specific Parameter
(GSP) which reflects Bupa’s own loss experience.
The capital positions of the Group and its regulated insurance entities are kept under constant review and these are reported
quarterly to the Board.
Bupa's capital resources are managed in line with the Group Capital Management Policy. While Bupa is subject to the Solvency
II requirements at a consolidated level, all regulated entities within the Group maintain sufficient capital resources to meet any
minimum capital requirement required by respective local regulators. In addition, Bupa and its regulated entities are required to
maintain a buffer over the regulatory minimum requirements in line with their capital risk appetites. During the year, Bupa and its
regulated entities complied with all external capital requirements. The ability of the Group’s regulated entities to transfer funds to
parent entities is subject to local solvency requirements.
Bupa has target ranges for solvency, leverage and interest cover ratios with a view to maintaining a strong long-term senior
credit rating for Bupa Finance plc with Fitch and Moody’s. Bupa as a whole is not rated by any rating agency. Individual debt
issues and certain subsidiaries within the Group have public ratings.
At least annually, the Group carries out an Economic Capital Assessment (ECA) in which it makes its own quantification of how
much capital is required to support its risks. The ECA is used to assess how well the Standard Formula SCR reflects the
Group’s actual risk profile.
The ECA forms part of the Own Risk and Solvency Assessment (ORSA) which comprises all the activities by which the Group
establishes the level of capital required to meet its solvency needs over the planning period given Bupa’s strategy and risk
appetite. The conclusions from these activities are summarised in the ORSA report which is reviewed by Bupa's Risk
Committee, approved by the Board and submitted to the PRA annually.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
112
Bupa’s eligible Own Funds include the Group IFRS net assets (£6.9bn) valued on a Solvency II basis, together with eligible
subordinated liabilities, subject to adjustments for non-available assets and non-controlling interests.
As at 31 December 2022, Bupa’s eligible Own Funds, determined in accordance with the Solvency II valuation rules, were
£4.9bn¹ (2021: £4.5bn), which was in excess of the Group estimated SCR of £2.7bn¹ (2021: £2.5bn). This represented a
solvency coverage ratio of 181%¹ (2021: 179%).
1.
Risk management
The Bupa Risk Committee has responsibility to the Board for the oversight of risk. It recommends to the Board a risk appetite
that reflects Bupa’s purpose and expresses the degree of risk Bupa should accept in delivering on its strategy.
Bupa operates a ‘three lines’ approach to the governance of risk management:
1.
Business management and employees are responsible for the identification and assessment of risks and controls.
2.
Risk, Compliance and Clinical Governance functions provide support and challenge the completeness and accuracy of
risk assessments and the adequacy of mitigation plans.
3.
Internal Audit provides independent and objective assurance on the robustness of the risk management framework, and
the appropriateness and effectiveness of internal controls.
The operations of the risk management framework and current principal risks of the Group and how they are mitigated are
described on pages 17-25.
The Group has adopted a risk management strategy that endeavours to mitigate these risks, which is approved by the Board. In
managing these exposures, the Corporate Finance Executive Committee reviews and recommends changes to the
management of insurance and investment risks.
The Group has exposure to a number of financial risks associated with its insurance business and from its use of financial
instruments. These have been categorised into the following types of financial risk, and details of the nature, extent, and how
the Group has managed these risks is described below.
–
Insurance risk
–
Market risk
–
Credit risk
–
Liquidity risk
26.1
Insurance risk
Insurance risk only affects the insurance entities in the Group. It consists of underwriting risks which relate to the potential
inadequacy of insurance premiums as well as reserving risk which relates to the potential inadequacy of claims provisions.
(i)
Underwriting risk
Underwriting risk refers to the potential deviation of claims experience from the actuarial assumptions used for setting insurance
premium rates which could lead to premium inadequacy. Underwriting risk is therefore concerned with both the setting of
adequate premium rates (pricing risk) and the management of claims (claims risk) for insurance policies underwritten by the
Group.
Pricing risk
Pricing risk relates to the setting of adequate premium rates taking into consideration the volume and characteristics of the
insurance policies issued. External influences on pricing risk include (but are not limited to) competitors’ pricing and product
design initiatives, regulatory environments and claims. The level of influence from these external factors can vary significantly
between regions and largely depends on the maturity of health insurance markets and the role of the regulator. Actuarial
analysis performed on a regular basis combined with an understanding of local market dynamics and the ability to change
insurance premium rates when necessary are effective risk mitigations.
The direct impacts of climate change on health are unclear but these impacts are likely to emerge over time and the short-tailed
nature of the Group's products allows for responses to be made to any developments, although this can be limited by pricing
controls in some markets.
In every general insurer in the Group, the dominant product or policy category is an annually renewable health insurance
contract. This permits insurance premium rate revisions to respond quickly to changes in customer risk profiles, claims
experience and market considerations.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
113
The ability to review premium rates is a significant mitigant to pricing risk. The Group does not underwrite a significant amount
of general insurance business that commits it to cover risks at premiums fixed beyond a 12-month period from inception or
renewal.
Claims risk
Claims risk is the risk of claims exceeding the amounts assumed in the premium rates. This can be driven by an adverse
fluctuation in the amount and incidence of claims incurred and external factors such as medical inflation.
Claims risk is managed and controlled by means of pre-authorisation of claims, outpatient benefit limits, the use of consultant
networks and agreed networks of hospitals and charges. Specific claims management processes vary across the Group
depending on local requirements, market environment and practice.
Adverse claims experience, for example, which is caused by external factors such as medical inflation, will affect cash flows
after the date of the Consolidated Financial Statements. Recent adverse claims experience is reflected in these Consolidated
Financial Statements in claims paid and movements in the provisions for claims.
Generally, the Group’s health insurance contracts provide for the reimbursement of incurred medical expenses, typically in-
hospital for treatment related to acute, rather than chronic, medical conditions. The contracts do not provide for capital sums or
indemnified amounts. Therefore, claims experience is underpinned by prevailing rates of illness events giving rise to
hospitalisations. Claims risk is generally mitigated by having processes to ensure that both the treatments and the resulting
reimbursements are appropriate.
(ii)
Reserving risk
Reserving risk is the risk that provisions made for claims prove to be insufficient in light of later events and claims experience.
There is a relatively low exposure to reserving risk compared with underwriting risk due to the very short-term nature of the
claims development patterns. The short-term nature of the Group’s general insurance contracts means that movements in
claims development assumptions are generally not significant. The development claims settlement patterns are kept under
constant review to maintain the validity of the assumptions and, hence, the validity of the estimation of recognised general
insurance liabilities.
The amount of claims provision at any given time that relates to potential claims payments that have not been resolved within
one year is around 5% in the context of the Group. The small provisions that relate to longer than one year can be calculated
with reasonable confidence.
In the early stages of the pandemic, government restrictions across many of our markets affected insurance customers’ ability
to access treatment in private healthcare facilities and make claims, particularly for elective procedures. A proportion of the
resultant shortfall in claims is expected to rebound over time and this could result in the cost of claims increasing in the long
run, due to the deferred costs of treating undiagnosed or under-treated illnesses. The Group has established reserves for the
deferred claims where a constructive obligation exists. As with any reserve of this nature, there is inherent uncertainty in the key
judgements, including claims inflation, which may impact future results.
(iii) Other risks related to underwriting health insurance business
Claims provisions are not discounted and their short-term nature means that changes in interest rates have no impact on
reserving risk. In addition, the future premium income and claims outflows of health insurance premium liabilities are largely
unaffected by changes in interest rates. However, changes to inflationary factors such as wage inflation and medical cost
inflation affect the value of future claims outflows.
None of the Group’s general insurance contracts contain embedded derivatives, so there are no additional financial risks,
including interest rate risk, arising from the contracts.
The Group is exposed to foreign currency risk through some of the insurance liabilities which are settled in a local currency.
Where possible, these liabilities are matched to assets in the relevant currency to hedge this exposure.
The majority of the Group’s general insurance activities are single-line health portfolios. Even though only one line of business
is involved, the Group does not have significant concentration of insurance risk for the following reasons:
•
Broad geographical diversity across several markets – across the UK, Spain, Australia, Latin America, Türkiye, the
Middle East and Hong Kong.
•
Product diversity between domestic and expatriate, and individual and corporate health insurance.
•
A variety of claims type exposures across diverse medical providers: consultants, clinics, individual hospitals and
hospital groups.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
114
The Group as a whole, and its principal general insurance entities, are well diversified in respect of insurance risk. Only in
selected circumstances does the Group use reinsurance. The reinsurance used does not give rise to a material counterparty
default credit risk exposure for the Group. Restrictions are in place on the credit quality and amount of reinsurance ceded to
individual counterparties. In most jurisdictions, Bupa has established fee agreements with healthcare provider groups to limit
the impact of unexpected claims cost inflation.
(iv) Catastrophe risk
A natural disaster or a man-made disaster could potentially lead to a larger than expected number of claims being received over
a short period of time, resulting in higher than expected claims costs. In the majority of jurisdictions, Bupa is not contractually
liable for such claims. Risks are further reduced by excess of loss reinsurance provided by third party reinsurers. Bupa’s Group
Actuarial function oversees and implements strategic improvements to ensure the overall adequacy of these arrangements.
Market risk
Market risk is the risk of adverse financial impact due to changes in fair values or future cash flows of financial instruments from
fluctuations in interest rates, foreign exchange rates, commodity prices, credit spreads and equity prices. The focus of the
Group’s long-term financial strategy is to facilitate growth without undue balance sheet risk.
In order to reduce the risk of assets being insufficient to meet future policyholder obligations, the Group actively manages
assets using an approach that balances duration, quality, diversification, liquidity and investment return.
The Group invests in a limited portfolio of return-seeking assets (principally bonds and loans) via the regulated entities in the
UK and Australia. These assets totalled £635m as at 31 December 2022 (2021: £632m). These entities use value at risk
analysis (VaR) to quantify risk, taking account of asset volatility and correlation between asset classes.
In addition to local VaR analysis, the Group applies an aggregate VaR limit to all cash and investments within the regulated
insurance entities. The Group also limits the contribution of the combined investment risk charge from all cash and investments,
in both insurance and provision businesses, to a maximum percentage of the Group’s Solvency Capital Requirement (SCR).
Foreign exchange risk
The Group is exposed to foreign exchange risks arising from commercial transactions and from recognising assets, liabilities
and investments in overseas operations. The Group is exposed to both transaction and translation risk. The former is the risk
that a company’s cash flows and realised profits may be impacted by movements in foreign exchange rates. The latter arises
from translating the financial statements of a foreign operation into the Group’s presentational currency.
The results and financial position of the Group’s foreign entities that do not have a functional currency of sterling are translated
into sterling as follows:
•
Assets and liabilities at the exchange rate at the reporting date.
•
Income and expenses at average rates for the period.
All foreign exchange differences arising on translation are recognised initially in other comprehensive income, and are only
subsequently reclassified to the Consolidated Income Statement in the period in which the entity is eventually disposed.
Foreign currency transactions in the Group’s subsidiaries are measured using the functional currency of the subsidiary, which is
based on the primary economic environment in which the subsidiary operates. The transactions are translated into the
functional currency at the exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange
rate ruling at the reporting date; the resulting foreign exchange gain or loss is recognised in operating expenses, except where
the gain or loss arises on financial assets or liabilities, when it is presented in financial income or financial expense as
appropriate.
Non-monetary assets and liabilities denominated in a foreign currency at historical cost are translated using the exchange rate
at the date of the transaction; therefore, no exchange differences arise.
Non-monetary assets and liabilities denominated in a foreign currency at fair value are translated using the exchange rate ruling
at the date that the fair value was determined. Transactional foreign exchange differences are recognised in operating
expenses. Non-monetary items include unearned premiums and deferred acquisition costs.
Transactional exposures arise as a result of differences between the currency of local revenues and claims, typically in the case
of international private medical insurance. The currency exposures are deemed to be acceptable but are kept under review by
management.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
115
As disclosed in Note 1.7, Türkiye became a hyperinflationary economy during the year. As a consequence, IAS 29 is applied
and 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 addition, all Turkish lira amounts, including transactions in the Income Statement during the year,
are translated to the Group's presentation currency of sterling, using the closing exchange rate in effect on 31 December 2022.
The impact of this adjustment is recorded within other foreign exchange translation differences in the Consolidated Statement of
Comprehensive Income and within the foreign exchange translation reserve in the 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.
The following significant exchange rates applied during the year:
Average rate
Closing rate
2022
2021
2022
2021
Australian dollar
1.78
1.83
1.77
1.86
Brazilian real
6.38
7.42
6.38
7.54
Chilean peso
1,076.32
1,045.64
1,023.92
1,152.93
Danish krone
8.73
8.65
8.39
8.84
Euro
1.17
1.16
1.13
1.19
Hong Kong dollar
9.68
10.69
9.42
10.55
Mexican peso
24.88
27.90
23.54
27.74
New Zealand dollar
1.94
1.95
1.91
1.98
Polish zloty
5.50
5.31
5.28
5.46
Saudi riyal
4.64
5.16
4.54
5.08
Turkish lira¹
22.58
12.22
22.58
17.97
US dollar
1.24
1.38
1.21
1.35
1.
Closing rate of Turkish lira applied to average rate following the application of IAS 29. Refer to Note 1.7 for details.
Foreign exchange hedging activities
The Group manages its exposure to foreign exchange risk by entering into hedging transactions using derivative financial
instruments. The Group applies fair value, cash flow and net investment hedge accounting.
The hedging relationship between a hedging instrument and a hedged item is formally documented. Documentation includes
the risk management objectives and the strategy in undertaking the hedge transaction.
(a)
Fair value hedges
Where a derivative financial instrument hedges the change in fair value of a recognised asset or liability or an unrecognised firm
commitment, any gain or loss on remeasurement of the hedging instrument at fair value is recognised in the Consolidated
Income Statement. The hedged item is fair valued for the hedged risk with any gain or loss on remeasurement being recognised
in the Consolidated Income Statement.
(b)
Cash flow hedges
Where a derivative financial instrument hedges the change in cash flows related to a recognised asset or liability, or a highly
probable forecast transaction, it is accounted for as a cash flow hedge.
The effectiveness of a cash flow hedge is the degree to which the cash flows attributable to a hedged risk are offset by changes
in the cash flows of the hedging instrument. The effective portion of any gain or loss on the hedging instrument is recognised
directly in other comprehensive income until the forecast transaction occurs, i.e. when a hedged interest payment is recognised
in the Consolidated Income Statement, the related hedging gain or loss is also recycled to the Consolidated Income Statement,
and when a hedged business combination is recognised, the hedging gain or loss is also recycled to goodwill in the
Consolidated Statement of Financial Position. The ineffective portion of the gain or loss is always recognised in the
Consolidated Income Statement.
If the hedged cash flow is no longer expected to take place, all deferred gains and losses are released to the Consolidated
Income Statement immediately. If the hedging instrument or hedge relationship is terminated but the hedged transaction is still
expected to occur, the cumulative gain or loss at that point remains in other comprehensive income and is recognised in
accordance with the above policy when the transaction occurs.
In 2021, a correction to the cash flow hedge reserve of £21m was recognised. The cash flow hedge reserve related to hedging
of acquisitions and should have been reallocated to goodwill (£20m) and investments in associates (£1m) on initial application
of IFRS 9 Financial Instruments. As at 31 December 2022, the cash flow hedge reserve amounts to £nil (2021: £nil).
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
116
(c)
Net investment hedging
The Group hedges appropriate levels of its net asset exposures after taking into consideration key regulatory and financial
metrics. To hedge the currency risk, the group designates the forward element of foreign currency forward and swap contracts
as hedging instruments. The Group hedges the net investments only to the extent of the notional amount of the foreign
exchange leg of the hedging derivative.
Changes in the fair value of the hedging instrument are initially recognised in other comprehensive income to the extent that the
hedge is effective. Exchange differences arising on the consolidation of these net assets are deferred in equity until the foreign
operation is disposed of or liquidated, when the differences are then recognised in the Consolidated Income Statement as part
of the gain or loss on disposal.
To assess hedge effectiveness, the Group determines the economic relationship between the hedging instrument and the
hedged items by comparing changes in the fair value of the hedging derivative with changes in the fair value of a hypothetical
derivative. An amount equal to the excess of the cumulative change in the fair value of the hedging derivative over the
cumulative change in the fair value of the hypothetical derivative, is recorded in the Consolidated Income Statement as
ineffectiveness. Ineffectiveness is expected to arise from the effect of counterparty and the Group’s credit risk on the fair value
of the derivative which is not reflected in the hypothetical derivative. Ineffectiveness could also arise from currency basis, which
is present in the hedging derivative but excluded from the hypothetical derivative.
Effect of foreign exchange hedging transactions
The table below shows the notional amounts and carrying values of the currency contracts held by the Group to hedge its net
investment in foreign operations as at the end of the year, along with the impact of net investment currency hedging activity.
2022
2021
£m
£m
Notional amounts
1,592
1,479
Carrying amount – Assets
5
29
Carrying amount – Liabilities
(53)
(5)
Financial statement line item
Derivatives
Derivatives
Change in value used for calculating hedge ineffectiveness
(82)
63
Hedging (losses)/gains recognised in other comprehensive income
(80)
62
Hedge ineffectiveness recognised in Consolidated Income Statement
(2)
1
Consolidated Income Statement line item (for ineffectiveness)
Financial expense
Financial expense
Consolidated Income Statement line item (for reclassifications)
Financial expense
Financial expense
Change in value used for calculating hedge ineffectiveness
(82)
63
Amounts in reserves for continuing hedges
(82)
63
In the Consolidated Financial Statements, where a loan between Group entities results in an exchange gain or loss, then it is
recognised in the Consolidated Statement of Comprehensive Income to the extent that it relates to the Group’s net investment
in overseas operations.
The Group has exposure to both translational and transactional foreign exchange risk arising from its overseas operations.
Currency exposures as at 31 December 2022 are as follows:
Net currency
exposure
Currency contracts
Net currency
exposure including
hedges
£m
£m
£m
2022
Australian dollar
2,572
(578)
1,994
Euro
1,006
(502)
504
New Zealand dollar
571
(277)
294
US dollar
307
(368)
(61)
Other
1,548
89
1,637
Total foreign denominated net assets
6,004
(1,636)
4,368
Percentage of Group net assets
87%
63%
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
117
Net currency
exposure
Currency contracts
Net currency
exposure including
hedges
£m
£m
£m
2021
Australian dollar
2,402
(552)
1,850
Euro
909
(529)
380
New Zealand dollar
593
(242)
351
US dollar
271
(320)
(49)
Other
1,345
172
1,517
Total foreign denominated net assets
5,520
(1,471)
4,049
Percentage of Group net assets
78%
58%
The impact of a hypothetical strengthening/weakening of sterling against the currencies below, with all other variables constant,
would have (decreased)/increased equity and profit by the amounts shown below. These tables consider both translation and
transaction risk.
Strengthening 10%
Weakening 10%
(Losses)/gains
included in
Consolidated
Income Statement
(Losses)/gains
included in Equity
Gains/(losses)
included in
Consolidated Income
Statement
Gains/(losses)
included in Equity
£m
£m
£m
£m
2022
Australian dollar
(17)
(181)
21
222
Euro
(24)
(46)
30
56
New Zealand dollar
–
(27)
–
33
US dollar
4
6
(5)
(7)
Other
11
(149)
(14)
181
Total sensitivity
(26)
(397)
32
485
Strengthening 10%
Weakening 10%
(Losses)/gains
included in
Consolidated Income
Statement
(Losses)/gains
included in Equity
Gains/(losses)
included in
Consolidated Income
Statement
Gains/(losses)
included in Equity
£m
£m
£m
£m
2021
Australian dollar
(17)
(168)
21
205
Euro
(14)
(35)
17
42
New Zealand dollar
(2)
(32)
2
39
US dollar
1
4
(1)
(5)
Other
(2)
(138)
3
169
Total sensitivity
(34)
(369)
42
26.2.2
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market interest rates.
The Group is exposed to interest rate risk arising from fluctuations in market rates. This affects the return on variable-rate
assets, the cost of variable-rate liabilities and the Statement of Financial Position value of its investment in fixed rate bonds.
Variable-rate assets represent a natural hedge for variable-rate liabilities.
The net asset balance on which the Group is exposed as at 31 December 2022 was £2,154m (2021: £2,002m). The rate at
which maturing deposits are reinvested, in currencies such as sterling and Australian dollar where the Group has a significant
variable-rate net asset exposure, represents a significant potential risk to the Group.
The Group has also used interest rate swaps to manage interest rate exposure whereby the requirement to settle interest at
fixed rates has been swapped for variable rates. This increases the ability to match variable-rate assets with variable-rate
liabilities.
Variable loans are repriced at intervals of between one and six months. Interest is settled on all loans in line with agreements
and is settled at least annually.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
118
The impact of a hypothetical rise of 100 basis points (bps) in interest rates at the reporting date, on an annualised basis, would
have decreased equity by £3m and profit by £2m (2021: decrease of £7m and £6m respectively). The impact of a fall of 100 bps
in interest rates, on an annualised basis, would have the inverse effect. This calculation is based on the assumption that all
other variables, in particular foreign exchange rates, remain constant.
Interest rate hedging activities
The Group applies fair value hedges and cash flow hedges to hedge its exposure to interest rate risk on its borrowings.
As at 31 December 2022, interest rate swaps totalling £600m have been entered into, to swap the fixed rate coupon on two
£300m senior unsecured bonds to a variable rate. These interest rate swaps are designated as fair value hedges of the
underlying interest rate risk on the debt. The fair value movement in the bonds attributable to the hedged risk for the year ended
31 December 2022 amounted to a gain of £43m (2021: £28m). The fair value movement on the interest rate swaps amounted
Credit risk
Credit risk is the risk that those that are in debt to the Group default on their obligations. Examples of credit risk would be non-
payment of a trade receivable or a corporate bond failing to repay the capital sum and related interest.
Investment exposure with external counterparties is managed by the Enterprise Treasury Policy which ensures that there is a
sufficient spread of investments and that cash and investment counterparties are rated at least A/A2 unless otherwise
approved. The Corporate Finance Executive Committee approves the full list of counterparties used on a periodic basis. There
are exceptions to the A/A2 rating requirement for a number of reasons including where local country ratings are below this level
and due to certain regulatory and commercial requirements in specific markets.
In estimating Expected Credit Losses (ECL) on financial investments, the Group reviews individual issuer's default probability
based on a credit score model over a 12-month horizon to determine whether there has been a material change in an issue
score from the preceding period. Where a specific default score is not available for a single investment, average default
probabilities for instruments with a similar credit rating are used.
Determining when an issuer is in financial difficulty and that a
lifetime ECL allowance is required, requires the use of judgement. The Group considers a number of factors including economy
wide and industry specific risk factors, issuer’s financial and liquidity position, near-term prospects, credit rating declines and
known breaches of contracts in determining
financial difficulty.
When there is objective evidence of impairment of a financial asset as a result of one or more events and the event has an
impact on the estimated future cash flows of the assets that can be reliably estimated, the Group considers such investments
as credit impaired.
To the extent that an investment is impaired, it is written down to its recoverable amount, measured as the
present value of expected future cash flows discounted at the original effective interest rate on the instrument. Subsequent
recoveries in excess of the written-down carrying value are credited to the Consolidated Income Statement.
The investment profile (including financial investments, restricted assets and cash and cash equivalents) as at 31 December is
as follows:
2022
2021
£m
£m
Investment grade counterparties
4,541
4,209
Non-investment grade counterparties
697
599
Total
5,238
4,808
Investment grade counterparties include restricted assets of £117m (2021: £158m). Non-investment grade counterparties are
those rated below BBB-/Baa3, and mainly comprise corporate bonds, government bonds, deposits with credit institutions and
pooled investment funds of £565m (2021: £488m), and cash and cash equivalents of £132m (2021: £92m).
Assets pledged as security include £117m (2021: £158m) of cash held in restricted access deposits.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
119
Information regarding the credit risk exposure for financial assets held at fair value through other comprehensive income and
amortised cost is provided below.
Government
debt securities
Corporate debt
securities and
secured loans
Deposits with
credit
institutions
Other loans
Restricted
assets
Cash and cash
equivalents
£m
£m
£m
£m
£m
£m
2022
AAA
173
186
–
–
1
2
AA- to AA+
107
361
631
–
–
402
A- to A+
44
580
521
–
116
810
BBB- to BBB+
99
4
3
–
–
57
BB+ and below (below investment
grade)
67
25
76
–
2
132
Total
490
1,156
1,231
–
119
1,403
Loss allowance¹
(2)
(1)
(1)
–
–
–
Carrying amount
488
1,155
1,230
–
119
1,403
1.
In addition, a provision for expected credit losses on financial investments at FVOCI of £1m has been recognised.
Government
debt securities
Corporate debt
securities and
secured loans
Deposits with
credit
institutions
Other loans
Restricted
assets
Cash and cash
equivalents
£m
£m
£m
£m
£m
£m
2021
AAA
75
196
–
–
1
76
AA- to AA+
41
176
527
–
–
604
A- to A+
–
378
449
–
155
908
BBB- to BBB+
61
11
20
–
2
58
BB+ and below (below investment
grade)
66
79
49
1
–
93
Total
243
840
1,045
1
158
1,739
Loss allowance¹
(2)
–
(1)
–
–
–
Carrying amount
241
840
1,044
1
158
1,739
1.
In addition a provision for expected credit losses on financial investments at FVOCI of £2m has been recognised
Information regarding the ageing and impairment of financial and insurance assets is shown below.
Not past due
0-3 months
3-6 months
6 months - 1
year
Greater than 1
year
Total carrying
value
£m
£m
£m
£m
£m
£m
2022
Insurance debtors gross value
1,247
126
29
17
21
1,440
Bad debt provision
(1)
(8)
(2)
(8)
(8)
(27)
Insurance debtors net value¹
1,246
118
27
9
13
1,413
Trade and other receivables gross
value
439
163
51
58
100
811
ECL
(6)
(5)
(4)
(6)
(17)
(38)
Trade and other receivables net
value²
433
158
47
52
83
773
Not past due
0-3 months
3-6 months
6 months - 1
year
Greater than 1
year
Total carrying
value
£m
£m
£m
£m
£m
£m
2021
Insurance debtors gross value
1,076
97
24
14
14
1,225
Bad debt provision
(2)
(8)
(6)
(5)
(6)
(27)
Insurance debtors net value¹
1,074
89
18
9
8
1,198
Trade and other receivables gross
value
228
156
46
50
67
547
ECL
(3)
(3)
(4)
(4)
(15)
(29)
Trade and other receivables net
value²
225
153
42
46
52
518
1.
Comprises insurance debtors, Medicare rebate and Risk Equalisation Special Account recoveries detailed in Note 12.
2.
Comprises trade receivables, other receivables, service concession receivables and accrued income detailed in Note 14.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
120
Information regarding the ECL allowance by class of financial investments held at fair value through other comprehensive
income and amortised cost is shown below.
Government
debt
securities
Corporate
debt
securities
and secured
loans
Deposits with
credit
institutions
Other loans
Trade and
other
receivables¹
Other
insurance
debtors²
Restricted
assets
Cash and
cash
equivalents
Gross
ECL
Gross
ECL
Gross
ECL
Gross
ECL
Gross
ECL
Gross
Bad debt
provision
Gross
ECL
Gross
ECL
2022
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
At beginning of
year
243
(4)
840
– 1,045
(1)
1
–
547
(29) 1,225
(27)
158
– 1,739
–
Recognition
and settlement
222
1
278
(1)
129
–
(1)
–
223
(7)
184
2
(45)
– (409)
–
Write offs
–
–
–
–
–
–
–
–
–
–
(17)
–
–
–
–
–
Foreign
exchange and
other
25
–
38
–
57
–
–
–
41
(2)
48
(2)
6
–
73
–
At end of year
490
(3) 1,156
(1) 1,231
(1)
–
–
811
(38) 1,440
(27)
119
– 1,403
–
Government
debt
securities
Corporate
debt
securities and
secured loans
Deposits with
credit
institutions
Other loans
Trade and
other
receivables¹
Other
insurance
debtors²
Restricted
assets
Cash and
cash
equivalents
Gross
ECL
Gross
ECL
Gross
ECL
Gross
ECL
Gross
ECL
Gross
Bad debt
provision
Gross
ECL
Gross
ECL
2021
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
At beginning of
year
143
(6)
871
(1) 1,146
(4)
1
–
522
(28) 1,210
(27)
149
– 1,706
–
Recognition
and settlement
103
–
(23)
1
(62)
3
–
–
66
(4)
56
(1)
9
–
125
–
Transfer from
assets held for
sale
–
–
–
–
–
–
–
–
(2)
–
–
–
–
–
–
–
Foreign
exchange and
other
(3)
2
(8)
–
(39)
–
–
–
(39)
3
(41)
1
–
–
(92)
–
At end of year
243
(4)
840
– 1,045
(1)
1
–
547
(29) 1,225
(27)
158
– 1,739
–
1.
Comprises trade receivables, other receivables, service concession receivables and accrued income detailed in Note 14.
2.
Comprises insurance debtors, Medicare rebate and Risk Equalisation Special Account recoveries detailed in Note 12.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
121
The following financial assets and liabilities are subject to offsetting, enforceable master netting arrangements and similar
agreements:
Related amounts not set off in
the Statement of Financial
Position
Gross
amounts of
recognised
financial
assets/
(liabilities)
Gross amounts
of recognised
financial
liabilities set
off in the
Statement of
Financial
Position
Net amounts of
financial
assets/
(liabilities)
presented in
the Statement
of Financial
Position
Financial
instruments
Cash collateral
received
Net amount
2022
£m
£m
£m
£m
£m
£m
Derivative financial assets
28
–
28
(27)
(1)
–
Derivative financial liabilities
(137)
–
(137)
27
81
(29)
Cash and cash equivalents
1,554
(151)
1,403
–
–
1,403
Total
1,445
(151)
1,294
–
80
1,374
Related amounts not set off in
the Statement of Financial
Position
Gross amounts
of recognised
financial
assets/
(liabilities)
Gross amounts
of recognised
financial
liabilities set off
in the Statement
of Financial
Position
Net amounts of
financial assets/
(liabilities)
presented in the
Statement of
Financial
Position
Financial
instruments
Cash collateral
received
Net amount
2021
£m
£m
£m
£m
£m
£m
Derivative financial assets
41
–
41
(15)
(19)
7
Derivative financial liabilities
(35)
–
(35)
15
3
(17)
Cash and cash equivalents
1,939
(200)
1,739
–
–
1,739
Total
1,945
(200)
1,745
–
(16)
1,729
The Group also mitigates credit risk in derivative contracts by entering into collateral agreements where appropriate. The
amount of collateral received or posted is shown in the table above.
For the financial assets and liabilities subject to enforceable master netting arrangements or similar arrangements above, each
agreement between the Group and the counterparty allows for net settlement of the relevant financial assets and liabilities
where both elect to settle on a net basis. In the absence of such an election, financial assets and liabilities will be settled on a
gross basis; however, each party to the master netting agreement or similar agreement will have the option to settle all such
Liquidity risk
Liquidity risk is the risk that the Group will not have available funds to meet its liabilities when they fall due.
The Group’s main source of short-term funding is via a £900m revolving credit facility which had an initial maturity of December
2026 with two, one-year extension options. The first extension option has been exercised leaving the current maturity as
December 2027 with a further one-year extension. The facility was drawn down by £70m as at 31 December 2022.
The Group monitors funding risk as well as compliance with existing financial covenants within the banking arrangements.
There were no concerns regarding bank covenant coverage in 2022 and that position is not expected to change in the
foreseeable future.
The Group holds a strong liquidity position and adheres to strict liquidity management policies as set by the Board Risk
Committee as well as adhering to liquidity parameters for the Group’s regulated entities. Regular stress testing is conducted to
assess liquidity risk.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
122
The contractual maturities of undiscounted financial liabilities and the expected maturities of insurance liabilities including
estimated interest payments of the Group are as follows:
Subordinated
liabilities
Other
interest-
bearing
liabilities
Lease
liabilities
Provisions
arising
from
insurance
contracts
Other
liabilities
arising
from
insurance
business
Trade and
other
payables¹
Derivative
liabilities
Total
£m
£m
£m
£m
£m
£m
£m
£m
As at 31 December 2022
2023
(297)
(83)
(177)
(3,646)
(221)
(2,172)
(73)
(6,669)
2024
(35)
(308)
(153)
(63)
–
(6)
(15)
(580)
2025
(34)
(5)
(131)
–
–
(1)
–
(171)
2026
(434)
(5)
(113)
–
–
(1)
–
(553)
2027
(14)
(303)
(103)
–
–
–
(49)
(469)
2028-2032
(73)
–
(331)
–
–
–
–
(404)
After 2032
(386)
–
(212)
–
–
–
–
(598)
Total
(1,273)
(704)
(1,220)
(3,709)
(221)
(2,180)
(137)
(9,444)
Carrying value in the
Consolidated Statement of
Financial Position
(998)
(648)
(926)
(3,709)
(221)
(2,180)
(137)
(8,819)
Subordinated
liabilities
Other
interest-
bearing
liabilities
Lease
liabilities
Provisions
arising from
insurance
contracts
Other
liabilities
arising from
insurance
business
Trade and
other
payables¹
Derivative
liabilities
Total
£m
£m
£m
£m
£m
£m
£m
£m
As at 31 December 2021
2022
(46)
(205)
(164)
(3,183)
(213)
(1,993)
(17)
(5,821)
2023
(291)
(15)
(147)
(50)
–
(5)
–
(508)
2024
(35)
(312)
(125)
–
–
(1)
(2)
(475)
2025
(35)
(9)
(107)
–
–
(1)
–
(152)
2026
(435)
(9)
(95)
–
–
–
–
(539)
2027-2031
(72)
(321)
(341)
–
–
–
(16)
(750)
After 2031
(400)
(8)
(226)
–
–
–
–
(634)
Total
(1,314)
(879)
(1,205)
(3,233)
(213)
(2,000)
(35)
(8,879)
Carrying value in the
Consolidated Statement of
Financial Position
(997)
(822)
(915)
(3,233)
(213)
(2,000)
(35)
(8,215)
1.
Comprises trade payables, other payables, occupational right agreement liabilities, refundable accommodation deposits, amounts owed to Parent and accruals
detailed in Note 21.
Interest payments are included in the cash flows for subordinated liabilities other interest-bearing liabilities and lease liabilities.
Maturity profile of financial assets
The majority of assets arising from insurance business and trade and other receivables fall due within one year as detailed in
Notes 12 and 14, respectively. The maturity profile of other financial assets (excluding ECLs), which are also available to fund
the repayment of liabilities as they crystallise, is as follows:
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
123
Cash and cash
equivalents
Deposits with
credit
institutions
Government
debt securities
Corporate debt
securities, other
loans and
equities
Pooled
investment
funds
Total
£m
£m
£m
£m
£m
£m
As at 31 December 2022
2023
1,403
1,190
448
892
436
4,369
2024
–
44
58
209
–
311
2025
–
–
6
154
–
160
2026
–
–
2
129
14
145
2027
–
–
3
44
–
47
2028-2032
–
–
3
54
9
66
After 2032
–
–
11
13
–
24
Total
1,403
1,234
531
1,495
459
5,122
Cash and cash
equivalents
Deposits with
credit institutions
Government debt
securities
Corporate debt
securities, other
loans and
equities
Pooled
investment funds
Total
£m
£m
£m
£m
£m
£m
As at 31 December 2021
2022
1,739
997
206
506
373
3,821
2023
–
43
33
169
–
245
2024
–
–
12
115
–
127
2025
–
5
1
95
–
101
2026
–
–
4
178
8
190
2027-2031
–
–
20
109
5
134
After 2031
–
–
12
23
–
35
Total
1,739
1,045
288
1,195
386
Related party transactions
Related party transactions are transactions between the Group and related individuals or entities by nature of influence or
control. The Group has such relationships with its key management personnel, equity-accounted investments and associated
pension arrangements. The disclosure of transactions with these parties in this note enables readers to form a view of the
impact of related party relationships on the Group.
All transactions with related parties are conducted on an arm’s-length basis.
There were no material transactions during the year with any related parties, as defined by IAS 24 Related Party Disclosures,
other than those disclosed in this note.
The key management personnel are the Group’s Directors and the Chief Executive Officers of the Group’s Market Units. No
Director had any material interest in any contracts with Group companies as at 31 December 2022 (2021: £nil) or at any time
during the year. The remuneration of the Group’s Directors is disclosed in Note 2.3.
The total remuneration of the Market Unit Chief Executive Officers is as follows:
2022
2021
£'000
£'000
Short term employee benefits
3,777
4,332
Long Term Incentive Plan awards
–
2,749
Post-employment benefits
104
101
Total
3,881
7,182
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
124
Commitments and contingencies
A commitment is future expenditure that is committed to as at 31 December 2022. These relate to contracted capital
expenditure. Contingent liabilities are those that are considered possible at year end, whose existence will be determined by an
uncertain future event or, a present obligation that is not sufficiently probable or cannot currently be measured with sufficient
reliability to give rise to a provision.
i)
Capital commitments
Capital expenditure for the Group contracted as at 31 December 2022 but for which no provision has been made in the
Consolidated Financial Statements amounted to £40m (2021: £68m). Of this, £40m (2021: £67m) relates to aged care facility
and retirement village project commitments in Australia and New Zealand and care homes in the UK; specifically £21m (2021:
Contingent assets and liabilities
The Group currently has no contingent assets.
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 other than the
item below will have a significant adverse impact on the financial condition of the Group.
In December 2022, a ruling was issued by the Supreme Court in Chile that obliges Isapres to make use of a table of risk factors
(used to adjust the price of insurance contracts based on risk factors such as age) prepared by the Chilean Superintendent of
Health in 2019. Like other Isapres, Isapre Cruz Blanca uses product-specific risk factor tables rather than the statutory table.
The ruling requires the statutory table to be applied going forward, and that where the statutory table is applied to previous
contracts entered into over the previous 3 years, the excess amount is to be returned to the customer to the extent the
application of the statutory table results in a lower price than that price charged during that period. Any retrospective payments
finally determined to be due in respect of historic policies as a result of this ruling would be liabilities for Isapre Cruz Blanca.
The calculation of the impact of the ruling is not possible without detailed application guidance which needs to be specified by
the regulator. The Chilean Superintendent of Health has six months to determine how to apply this ruling to Isapre businesses
and there is currently significant uncertainty around how it will be applied and therefore its potential impacts. In the absence of
the necessary application details, Bupa Chile is unable to reliably estimate the value of the future retrospective payments,
therefore, no provision has been recognised as at 31 December 2022. The regulator has confirmed publicly that as at 31
December 2022, the Isapres are not able to reliably estimate the amount and this should be disclosed as a contingent liability
considering the requirements of IAS 37.
There are a broad range of possible outcomes in respect of the potential retrospective payments arising from the recent
Supreme Court decision, however, in contrast to the requirements of IFRS, under Solvency II the Group is required to include a
value for contingent liabilities, even if the amount of the obligation cannot be measured with sufficient reliability. The Group has
included an allowance of £100m for this contingent liability for retrospective payments within the Solvency II regulatory balance
sheet. The final impact is likely to differ materially from this value and this is a calculation for Solvency II purposes and not a
iii)
Defined benefit post-employment schemes
The Company has entered into a legally binding and irrevocable guarantee for the benefit of the trustee of the principal defined
Entities in which the Group holds less than 100% equity interest
(i) Consolidation of entities in which the Group holds less than 50% equity interest
Eurocredit Investment Fund 1 plc
Eurocredit Investment Fund is a structured entity set up for the purpose of investing in primary and secondary secured loans.
Notes to the Consolidated Financial Statements (continued)
for the year ended 31 December 2022
125
Statement of Financial Position
as at 31 December 2022
2022
2021
Note
£m
£m
Assets
Property, plant and equipment
B
43
32
Investment in subsidiaries
C
4,046
4,961
Restricted assets
D
40
45
Derivative assets
E
5
29
Deferred taxation assets
F
7
5
Trade and other debtors
G
98
66
Cash and cash equivalents
H
14
13
Total assets
4,253
5,151
Liabilities
Borrowings
I
(1,607)
(1,727)
Lease liabilities
J
(43)
(30)
Derivative liabilities
E
(115)
(24)
Provisions for liabilities and charges
(3)
–
Trade and other creditors
K
(1,073)
(2,718)
Total liabilities
(2,841)
(4,499)
Net assets
1,412
652
Equity
Called-up share capital
L
200
200
Profit and loss account
915
155
Total attributable to ordinary shareholder
1,115
355
Restricted Tier 1 notes
M
297
297
Total equity
1,412
652
Approved by the Board of Directors and signed on its behalf on 1 March 2023 by
James Lenton
Director
Registered Number 2779134
Notes A-P form the associated notes to the Company financial statements.
Financial Statements of the Company
for the year ended 31 December 2022
126
Statement of Changes in Equity
For the year ended 31 December 2022
Called-up share
capital
Profit and loss
account
Total equity
attributable to
shareholder
Restricted Tier
1 notes
Total equity
£m
£m
£m
£m
£m
Balance as at 1 January 2022
200
155
355
297
652
Comprehensive income for the year
Profit for the year
–
859
859
–
859
Total comprehensive income for the year
–
859
859
–
859
Transactions with owners, recorded
directly in equity
Dividends
–
(89)
(89)
–
(89)
Total distributions to owners
–
(89)
(89)
–
(89)
Payment of Restricted Tier 1 coupon, net of
taxation
–
(10)
(10)
–
(10)
Balance as at 31 December 2022
200
915
1,115
297
1,412
Called-up share
capital
Profit and loss
account
Total equity
attributable to
shareholder
Restricted Tier 1
notes
Total equity
£m
£m
£m
£m
£m
Balance as at 1 January 2021
200
256
456
–
456
Comprehensive loss for the year
Loss for the year
–
(49)
(49)
–
(49)
Total comprehensive loss for the year
–
(49)
(49)
–
(49)
Transactions with owners, recorded
directly in equity
Dividends
–
(52)
(52)
–
(52)
Total distributions to owners
–
(52)
(52)
–
(52)
Issue of Restricted Tier 1 notes
–
–
–
297
297
Balance as at 31 December 2021
200
155
355
297
652
Notes A-P form the associated notes to the Company financial statements.
Financial Statements of the Company
for the year ended 31 December 2022
127
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’).
These financial statements have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure
Framework (FRS 101). In preparing these financial statements, the Company applies the recognition, measurement and
disclosure requirements of International Financial Reporting standards (IFRS) as adopted by the UK (UK-adopted international
accounting standards) and makes amendments where necessary in order to comply with the Companies Act 2006. The
Company has set out below where advantage of the FRS 101 disclosure exemptions has been taken.
The Company is taking advantage of the exemption in Section 408 of the Companies Act 2006 not to present its individual profit
and loss account. As the consolidated financial statements of the Group include the equivalent disclosures, the Company has
also taken the exemptions under FRS 101 available in respect of the following disclosures:
•
Cash Flow Statement and related notes;
•
Disclosures in respect of capital management;
•
The effects of new but not yet effective IFRSs;
•
Disclosures in respect of compensation of key management personnel;
•
Certain disclosures required by IFRS 7 and IFRS 13 regarding financial instrument disclosures have not been
provided apart from those which are relevant for the financial instruments which are held at fair value and are not held
as either part of a trading portfolio or derivatives; and
•
IAS 24 - Exemption for related party transactions entered into between two or more members of a group, provided
that any subsidiary party to the transaction is wholly owned by such a member.
Company accounting policies
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these
financial statements.
(a)
Accounting estimates and judgements
The impairment review of investments in subsidiaries is a source of significant estimation uncertainty in the preparation of the
Company financial statements. Annual impairment tests include a number of sources of estimation uncertainty as the key
assumptions used when modelling the recoverable amount include estimating the discount rate, terminal growth rate and the
forecast cash flows. Changes to these assumptions could materially change the calculation of the recoverable amount.
(b)
Restatements and changes in accounting policies
The Company has consistently applied its accounting policies to all periods presented in these financial statements.
(c)
Going concern
The Directors have a reasonable expectation that the Company has access to adequate resources to continue in operational
existence for at least the next 12 months from the date of approval of these financial statements. They continue to adopt the
going concern basis of accounting in preparing the annual financial statements.
(d)
Foreign currency
The financial statements are presented in sterling, which is also the currency of the primary economic environment in which the
Company operates (its functional currency). Transactions in currencies other than the functional currency are recorded at the
rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are
translated into the functional currency at the exchange rate ruling at the reporting date. Non-monetary items denominated in a
foreign currency at historical cost are translated using the exchange rate at the date of the transaction therefore, no exchange
differences arise.
Exchange differences are recognised in the profit and loss account in the period in which they arise except for:
•
Exchange differences on foreign currency borrowings relating to assets under construction for future productive use,
which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those
foreign currency borrowings; and
•
Exchange differences on transactions entered into to hedge certain foreign currency risks (see below under financial
instruments/hedge accounting).
Financial Statements of the Company
for the year ended 31 December 2022
128
(e)
Financial income and expenses
Financial income comprises interest receivable, realised gains and losses on investments, foreign exchange gains and losses,
dividend income on equity investments and changes in the fair value of items recognised at fair value through profit or loss.
Interest income, except in relation to assets classified as at fair value through profit or loss, is recognised in the profit and loss
account as it accrues, using the effective interest method.
Changes in the value of financial investments at fair value through the profit and loss account are recognised within financial
income as an unrealised gain or loss while the asset is held. Upon derecognition of these assets, the cumulative unrealised
gain or loss is reversed and a realised gain or loss is recognised.
Financial expense includes interest payable on borrowings, calculated using the effective interest method, and other financial
expenses.
(f)
Classification of financial instruments issued by the Company
Financial instruments issued by the Company are treated as equity only to the extent that they meet the following two
conditions:
•
They include no contractual obligations upon the Company to deliver cash or other financial assets or to exchange
financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the
Company; and
•
Where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that
includes no obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will
be settled by the Company exchanging a fixed amount of cash or other financial assets for a fixed number of its own
equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so
classified takes the legal form of the Company’s own shares, the amounts presented in these financial statements for called-up
share capital and share premium account exclude amounts in relation to those shares.
Where a financial instrument contains both equity and financial liability components, these components are separated and
accounted for individually under the above policy.
(g)
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity and debt securities, trade and other debtors, cash and cash
equivalents, loans and borrowings, and trade and other creditors.
(h)
Property, plant and equipment
Property, plant and equipment are held at historical cost less accumulated depreciation and recognised impairment losses.
Depreciation is charged to the profit and loss account on a straight-line basis to allocate cost less residual value over the
estimated useful life, as follows:
•
Right-of-use property
lease term
•
Leasehold improvements
shorter of useful life or lease term
•
Owned equipment
3 to 10 years
No depreciation is charged on assets under construction. Useful lives, depreciation method and residual values are reviewed at
each reporting date.
Impairment reviews are undertaken where there are indicators that the carrying value may not be recoverable. An impairment
loss is recognised in the profit and loss account to reduce the carrying value to the recoverable amount. Assets classified as
under construction are also reviewed for impairment at each reporting date.
(i)
Leases of property
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the Company’s incremental borrowing rate taking into account the duration of the lease.
The lease liability is subsequently measured at amortised cost using the effective interest method, with the finance cost charged
to the profit and loss account over the lease period so as to produce a constant periodic rate of interest on the remaining
balance of the liability. It is remeasured when there is a change in future lease payments arising from a change in index or rate,
or if the Company changes its assessment of whether it will exercise an extension or termination option. The lease liability is
recalculated using a revised discount rate if the lease term changes as a result of a modification or reassessment of an
extension or termination option. The leases currently held by the Company do not contain any extension or termination options.
Financial Statements of the Company
for the year ended 31 December 2022
129
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any
lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to
restore properties to their original condition, less any lease incentives received. The right-of-use asset, excluding restorations
costs, is typically depreciated on a straight-line basis over the lease terms. In addition, the right-of-use asset may be adjusted
for certain remeasurements of the lease liability, such as indexation and market rent review uplifts. Restoration costs included in
the right-of-use asset are amortised over the same term as the corresponding provision, which may be longer than the IFRS 16
contractual lease term where occupancy of the property is expected to be longer than the existing contract.
The Company has elected not to recognise the right-of-use assets and lease liabilities for short-term leases that have a term of
12 months or less or leases that are of low value (£4,000 or less). Lease payments associated with these leases are expensed
on a straight-line basis over the lease term.
(j)
Investments in subsidiary undertakings
Investments in subsidiary undertakings are stated at cost less impairment. Investments are reviewed annually to test whether
any indicators of impairment exist. Where there is objective evidence of such an asset being impaired, the investment is
impaired to its recoverable value and any unrealised loss is recorded in the profit and loss account.
When any indication that an impairment loss recognised in prior periods may no longer exist or may have decreased, the
recoverable amount of an investment is assessed. Should the recoverable value exceed the carrying value, an impairment
reversal is recognised in the profit and loss account up to the value of previously recorded impairments.
Dividends received from subsidiaries are recognised in the profit and loss account when the right to receive is established.
All loans and receivables to and from subsidiary undertakings are shown at cost less amounts written off where deemed
irrecoverable.
(k)
Restricted assets
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 are held as restricted assets on the Statement of Financial Position.
(l)
Derivative financial instruments
Derivative financial instruments are accounted for at fair value through profit or loss. The gain or loss on remeasurement to fair
value is recognised immediately in the profit and loss account. However, where derivatives qualify for hedge accounting,
recognition of any resultant gain or loss depends on the nature of the item being hedged (see below).
Derivative fair value
Fair values of derivative instruments are obtained from market observable pricing information including interest yield curves.
The value of foreign exchange forward contracts and swaps is established using listed market prices.
Hedge accounting
The Company applies fair value hedge accounting. The Company formally documents the hedging relationship between a
hedging instrument and a hedged item. Documentation includes the risk management objectives and the strategy in
undertaking the hedge transaction.
Cash flow hedges
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability,
or a highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is
recognised directly in the hedging reserve. Any ineffective portion of the hedge is recognised immediately in the profit and loss
account.
Fair value hedges
Where a derivative financial instrument is designated as a hedge of the variability in fair value of a recognised asset or liability
or an unrecognised firm commitment, all changes in the fair value of the derivative are recognised immediately in the profit and
loss account. The carrying value of the hedged item is adjusted by the change in fair value that is attributable to the risk being
hedged (even if it is normally carried at cost or amortised cost) and any gains or losses on remeasurement are recognised
immediately in the profit and loss account (even if those gains would normally be recognised directly in equity).
(m)
Trade and other debtors
Amounts owed by subsidiaries
Amounts are recognised initially at fair value. They are subsequently measured at amortised cost using the effective interest
method, net of provision for expected credit loss (ECL).
Financial Statements of the Company
for the year ended 31 December 2022
130
Amounts are measured net of lifetime ECL. Where appropriate, a provision matrix is used to estimate ECL. Under a provision
matrix, receivables are grouped into customer segments and further divided into categories by age. Historical credit loss
experience and any relevant forward looking information is then used to establish the ECL provision for each category.
Other trade and other debtors
This predominantly relates to pledges of cash collateral in respect of certain derivative contracts. Collateral pledged in the form
of cash is recognised and subsequently measured at fair value.
(n)
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and 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.
(o)
Trade and other creditors
Trade and other creditors are recognised initially at fair value. They are subsequently measured at amortised cost using the
effective interest method.
(p)
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial
recognition, they are held at amortised cost using the effective interest method, less any impairment losses.
(q)
Restricted Tier 1 (RT1) debt
The RT1 notes meet the classification of equity and are presented as a separate category of equity in the Statement of
Financial Position at an amount equal to the proceeds of issue less transaction costs. RT1 coupons are recognised directly in
the Statement of Changes in Equity, net of taxation, upon payment.
(r)
Intra-group financial instruments
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its
group, the Company considers these to be insurance arrangements and accounts for them as such. In this respect, the
Company treats the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be
required to make a payment under the guarantee.
(s)
Taxation including deferred taxation
Taxation on the profit or loss for the year comprises current and deferred taxation. Taxation is recognised directly in equity to the
extent that it relates to items recognised directly in equity or other comprehensive income.
Current taxation is the expected taxation payable or receivable on the taxable income or loss for the year, using taxation rates
enacted or substantively enacted at the reporting date, and any adjustment to taxation payable in respect of previous years.
Deferred taxation is recognised in full using the balance sheet liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The
following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of an asset or
liability in a transaction that is not a business combination and which, at the time of the transaction, affects neither accounting
nor taxable profit or loss, and differences relating to investments in subsidiaries to the extent that the Company is able to control
the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the
foreseeable future. The amount of deferred taxation recognised is based on the expected manner of realisation or settlement of
the carrying amount of assets and liabilities, using taxation rates enacted or substantively enacted at the reporting date.
A deferred taxation asset is recognised only to the extent that it is probable that future taxable profits will be available against
which the asset can be utilised.
(t)
Provisions
A provision is recognised in the Statement of Financial Position when the Company has a present legal or constructive
obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of economic benefits will
be required to settle the obligation. If the effect is material, provisions are determined by discounting the estimated future
payments at a pre-taxation rate that reflects a current market assessment of the time value of money and, where appropriate,
the risks specific to the liability.
Profit/(loss) attributable to the Company
The profit within the financial statements of the Company is £859m (2021: loss of £49m). In accordance with the exemption
granted under Section 408 of the Companies Act 2006, a separate profit and loss account for the Company has not been
presented.
Financial Statements of the Company
for the year ended 31 December 2022
131
Notes to the Financial Statements
A.
Directors and employees
The Company employed no employees during 2022 (2021: nil) and had four Directors as at 31 December (2021: four). During
the year six individuals served as Directors (2021: six). Details of Directors serving during the year can be found on page 2.
Directors’ remuneration
Remuneration paid to the Directors is borne by the Company or other Group companies and is disclosed in Note 2.3.1.
B.
Property, plant and equipment
2022
2021
Right-of-
use asset
property
Leasehold
improvements
Owned
equipment
Total
Right-of-use
asset
property
Leasehold
improvements
Owned
equipment
Total
£m
£m
£m
£m
£m
£m
£m
£m
Cost or valuation
At beginning of year
32
9
1
42
32
9
2
43
Additions
16
–
–
16
–
–
–
–
Disposals
–
–
–
–
–
–
(1)
(1)
At end of year
48
9
1
58
32
9
1
42
Depreciation and
impairment loss
At beginning of year
7
3
–
10
5
2
1
8
Depreciation charge for
year
4
1
–
5
2
1
–
3
Disposals
–
–
–
–
–
–
(1)
(1)
At end of year
11
4
–
15
7
3
–
10
Net book value at end of
year
37
5
1
43
25
6
1
32
Net book value at
beginning of year
25
6
1
32
27
7
1
35
C.
Investment in subsidiaries
At
beginning
of year
Impairment
loss
Reversal of
impairment
losses
Additions
Disposals
Redemptions/
Repayments
Foreign
exchange
revaluation
At end of
year
£m
£m
£m
£m
£m
£m
£m
£m
2022
Group Undertakings:
Shares in subsidiary undertakings
5,588
–
–
1
(36)
–
110
5,663
Loans to Group companies
187
–
–
5
–
(117)
–
75
5,775
–
–
6
(36)
(117)
110
5,738
Provision for impairment
(814)
(1,059)
145
–
36
–
–
(1,692)
Net book value
4,961
(1,059)
145
6
–
(117)
110
4,046
At beginning of
year
Impairment loss
Additions
Redemptions/
Repayments
Foreign
exchange
revaluation
At end of year
2021
£m
£m
£m
£m
£m
£m
Group Undertakings:
Shares in subsidiary undertakings
5,943
–
616
(850)
(121)
5,588
Loans to Group companies
795
–
9
(617)
–
187
6,738
–
625
(1,467)
(121)
5,775
Provision for impairment
(787)
(27)
–
–
–
(814)
Net book value
5,951
(27)
625
(1,467)
(121)
4,961
Financial Statements of the Company
for the year ended 31 December 2022
132
Additions in the year of £1m primarily relate to capital injections to existing subsidiaries. In 2021, the Company capitalised
£616m of loans to Group companies to shares in subsidiary undertakings. In addition, the Company redeemed £850m of
preference shares in subsidiary undertakings. Loans to Group companies comprise loan facilities of a fixed amount and a long-
term maturity date, with the movements in the year driven principally by capitalised interest and the loan capitalisation during
the year.
A £752m impairment was recognised in relation to the Company's shareholding in The Oasis Healthcare Group Limited, and an
additional provision of £307m recognised in relation to the Company's shareholding in Bupa Care Homes (Holdings) Limited.
This was partially offset by the reversal of provisions of £82m and £63m in respect of Bupa Care Homes (CFG) plc and
Cromwell Health Group Limited respectively.
In 2021, an additional £24m provision was recognised in relation to the shareholding in Bupa Care Homes (CFG) plc and an
additional £3m provision was recognised in relation to Bupa Care Homes Investments (Holdings) Limited.
The subsidiary undertakings of the Company as at 31 December 2022 are listed in Note P.
D.
Restricted assets
2022
2021
£m
£m
Restricted assets
40
45
The restricted assets balance of £40m (2021: £45m) consists of cash deposits held to secure a charge over the unfunded
pension scheme obligations held in the Parent.
E.
Derivative assets and liabilities
A derivative is a financial instrument whose value is based on one or more underlying variables. The Company uses derivative
financial instruments to hedge its exposure to foreign exchange and interest rate risk. Derivatives are not held for speculative
reasons.
The fair value of non-current derivative assets relate to interest rate swaps which are recognised at fair value. The interest rate
swaps are held to hedge the 2024 £300m and 2027 £300m unsecured bonds issued by the Company.
Derivatives are held at fair value through profit or loss, and therefore the carrying value is equal to fair value.
2022
2021
£m
£m
Derivative assets
Non-current
2
5
Current
3
24
Total derivative assets
5
29
Derivative liabilities
Non-current
(64)
(18)
Current
(51)
(6)
Total derivative liabilities
(115)
(24)
Valuation techniques and assumptions applied for the purposes of measuring fair value
Derivatives that have been purchased or issued as part of a hedge that subsequently do not qualify for hedge accounting are
accounted for at fair value through profit or loss.
Fair values are obtained from market observable pricing information including interest rate yield curves.
Financial Statements of the Company
for the year ended 31 December 2022
133
F.
Deferred taxation assets
Deferred taxation is an amount which recognises the differences between the carrying amounts of assets and liabilities for
financial reporting and the amounts used for taxation purposes. Deferred taxation assets relating to provisions and unused
taxation losses are recognised only to the extent that it is probable that future taxable profits will be available against which the
assets can be utilised.
Deferred taxation assets are attributable to the following:
2022
2021
£m
£m
Provisions
1
–
Taxation value of losses carried forward
6
5
Deferred taxation assets
7
5
Unrecognised deferred taxation assets
As at 31 December 2022, the Company had deductible temporary differences relating to trading losses of £7m (2021: £nil) for
which no deferred taxation asset was recognised due to uncertainty of utilisation of those temporary differences.
Movement in net deferred taxation assets:
At beginning of year
Recognised in
Income Statement
At end of year
£m
£m
£m
2022
Provisions
–
1
1
Taxation value of losses carried forward
5
1
6
Total
5
2
7
G.
Trade and other debtors
2022
2021
£m
£m
Amounts owed by subsidiaries
23
25
Other trade and other debtors
75
41
Total trade and other debtors
98
66
All balances are current.
H.
Cash and cash equivalents
2022
2021
£m
£m
Cash at bank and in hand
–
1
Short-term deposits
14
12
Cash and cash equivalents
14
13
Financial Statements of the Company
for the year ended 31 December 2022
134
I.
Borrowings
2022
2021
Note
£m
£m
Subordinated liabilities
Subordinated unguaranteed bonds
(a)
998
997
Total subordinated liabilities
998
997
Other interest-bearing liabilities
Senior unsecured bonds
(b)
540
582
Bank loans
(c)
69
148
Total other interest-bearing liabilities
609
730
Total borrowings
1,607
1,727
Non-current
1,286
1,579
Current
321
148
a)
Subordinated unguaranteed bonds
The total carrying value of subordinated unguaranteed bonds, net of accrued interest, capitalised issue costs and discounts,
was £998m (2021: £997m).
On 24 September 2021, the Company early redeemed £250m of £500m unguaranteed subordinated bonds originally due to
mature on 25 April 2023. Maturity of the remaining £250m portion is unchanged and interest is payable on the bonds at 5.00%
per annum. In the event of the winding up of the Company the claims of the bondholders are subordinated to the claims of other
creditors of the Company.
On 25 June 2020, the Company issued £350m of unguaranteed subordinated bonds which mature on 14 June 2035. Interest is
payable on the bonds at 4.125%. In the event of the winding up of the Company the claims of the bondholders are subordinated
to the claims of other creditors of the Company.
On 8 December 2016, the Company issued £400m of unguaranteed subordinated bonds which mature on 8 December 2026.
Interest is payable on the bonds at 5.000% per annum. In the event of winding up of the Company the claims of the
bondholders are subordinated to the claims of other creditors of the Company.
The Company has not had any defaults of principal, interest or other breaches with respect to subordinated liabilities during
2022 or 2021.
b)
Senior unsecured bonds
The total senior unsecured bonds balance of £540m (2021: £582m) is net of initial issue costs, discount on issue, accrued
interest and, where hedged, a fair value adjustment in respect of hedged interest rate risk.
On 17 June 2021, the Company repaid £350m of senior unsecured bonds. Interest was payable on the bonds at 3.375% per
annum.
On 25 June 2020, the Company issued £300m of senior unsecured bonds, guaranteed by the Parent, which mature on 14 June
2027. Interest is payable on the bonds at 1.750% per annum. The total hedged fair value of these £300m senior unsecured
bonds, including accrued interest, capitalised issue costs and discounts, is £252m (2021: £284m). The valuation adjustment is
the change in value arising from interest rate risk which is matched by the fair value of swap contracts in place to hedge this
risk.
On 5 April 2017, the Company issued £300m of senior unsecured bonds, guaranteed by the Parent, which mature on 5 April
2024. Interest is payable on the bonds at 2.000% per annum. The total hedged fair value of these £300m senior unsecured
bonds, including accrued interest, capitalised issue costs and discounts, is £288m (2021: £298m). The valuation adjustment is
the change in value arising from interest rate risk which is matched by the fair value of swap contracts in place to hedge this
risk.
See Note 26.2.2 for details on the Group's interest rate hedging activities.
Financial Statements of the Company
for the year ended 31 December 2022
135
c)
Bank loans
Bank loans of £69m (2021: £148m) include drawings of £70m (2021: £150m drawn down) under a £900m revolving credit
facility entered into in December 2021, with a maturity of December 2026. The facility replaced an £800m revolving credit facility
and a separate £40m bilateral loan facility. In November 2022, the facility was extended by the first of the two options with the
maturity date for the facility now December 2027. The second optional extension is in November 2023.
The drawings under the £900m facility are guaranteed by the Parent.
The bank loans bear interest at commercial rates linked to SONIA for sterling or equivalent for other currencies.
J.
Lease Liabilities
2022
2021
£m
£m
At the beginning of the year
30
33
Additions
14
–
Interest on lease liabilities
1
1
Repayments
(2)
(4)
At end of year
43
30
Non-current
38
27
Current
5
3
K.
Trade and other creditors
2022
2021
£m
£m
Amounts owed to subsidiaries
1,070
2,714
Other creditors
3
4
Total trade and other creditors
1,073
2,718
All balances are current.
L.
Called-up share capital
2022
2021
£m
£m
Allocated, called-up and fully paid
200,050,000 ordinary shares of £1 each
200
200
M.
Restricted Tier 1 (RT1) notes
The RT1 notes meet the classification of equity and are presented as a separate category of equity in the Statement of
Financial Position at an amount equal to the proceeds of issue less transaction costs. RT1 coupons are recognised directly in
the Statement of Changes in Equity, net of tax, upon payment.
2022
2021
£m
£m
Restricted Tier 1 notes
297
297
On 24 September 2021, the Company 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 year was £12m (2021: £nil).
The RT1 notes are perpetual with no fixed maturity or redemption date. The notes have a first call date of 24 March 2032 and
interest is payable at the sole and absolute discretion of the Company, with cancelled interest providing no rights to the holder
of the notes nor being considered a default. The RT1 notes are therefore treated as equity. The notes are convertible to share
capital of the Company on the occurrence of certain trigger events.
Financial Statements of the Company
for the year ended 31 December 2022
136
N.
Commitments, contingencies and guarantees
Pension contributions
The Company has given a legally binding and irrevocable guarantee for the benefit of the trustees of The Bupa Pension
Scheme, in respect of payments that the Parent was obliged to make between 31 December 2021 and 31 December 2022 to
The Bupa Pension Scheme.
Contingent liabilities
Under a Group registration the Company is jointly and severally liable for Value Added Tax due by certain other companies in
the Group.
Guarantees
As at 31 December 2022, the Company was party to a £900m multi-currency revolving credit facility. The Company has joint
and several liability for all obligations under the multi-currency revolving credit facility described in Note I(c). The revolving credit
facility was drawn down by £70m as at 31 December 2022 (2021: £150m drawn down).
The Company has provided guarantees to certain other Group undertakings. These are either as part of the Group banking
arrangements in respect of the overdrafts, or, if called on to do so, to provide or procure necessary support to enable certain
other Group undertakings to meet their liabilities as they fall due.
O.
Ultimate Parent
The Company’s immediate and ultimate parent undertaking is The British United Provident Association Limited which includes
the Company in its consolidated financial statements. The consolidated financial statements of The British United Provident
Association Limited are prepared in accordance with International Financial Reporting Standards and are available to the
public. Copies of the consolidated financial statements of The British United Provident Association Limited can be obtained from
The Registrar of Companies, Cardiff, CF14 3UZ.
P.
Related Undertakings
In compliance with Section 409 of the Companies Act 2006, disclosed below is a list of the Company’s related undertakings as
at
31 December 2022, comprising subsidiaries, joint ventures, associated undertakings and other significant holdings, together
with the country of incorporation, registered office address, each share class held by the Company and the Group and the
proportion of the nominal value of the shares of that class represented by those shares. Refer to Notes 1.2 and 6 for further
information on basis of consolidation and accounting policies.
Subsidiaries
Unless otherwise stated, the subsidiaries listed below are wholly owned indirectly by the Company with 100% of the nominal
value of each share class held by Group subsidiaries. Where a subsidiary is not wholly owned, the proportion of the nominal
value of each share class held by the Company or the Group, together with the Group’s effective ownership, calculated by
reference to the voting rights, is shown below. All subsidiaries are included in the Group consolidation.
Name
Share class
Proportion of
class held (%)
Effective %
ownership
Australia
Level 16, 33 Exhibition Street, Melbourne VIC 3000, Australia
Australia Fair Dental Care Pty Ltd
AUD Ordinary
Benefit Pocket Pty Ltd
AUD Ordinary
Bupa Aged Care Australasia Pty Limited
AUD Ordinary
Bupa Aged Care Australia Holdings Pty Ltd
AUD Ordinary
Bupa Aged Care Australia Pty Ltd
AUD Ordinary
Bupa Aged Care Holdings Pty Ltd
AUD Ordinary
Bupa Aged Care Property No.2 Trust
Trust Interest
Bupa Aged Care Property No.3 Trust
Trust Interest
Bupa Aged Care Property No.3A Trust
Trust Interest
Bupa Aged Care Property Trust
Trust Interest
Bupa ANZ Finance Pty Ltd
AUD Ordinary
Bupa ANZ Group Pty Ltd
AUD Ordinary
Bupa ANZ Healthcare Holdings Pty Ltd
AUD Ordinary
Bupa ANZ Insurance Pty Ltd
AUD A Preference, AUD
Ordinary
Bupa ANZ Property 1 and 2 Limited
AUD Ordinary
Bupa ANZ Property 3 and 3A Pty Ltd
AUD Ordinary
Financial Statements of the Company
for the year ended 31 December 2022
137
Name
Share class
Proportion of
class held (%)
Effective %
ownership
Australia (continued)
Bupa Care Villages Australia Pty Ltd
AUD Ordinary
Bupa Dental Corporation Pty Ltd
AUD Ordinary
Bupa Foundation (Australia) Limited
Guarantee Membership
Interest
Bupa Health Services Pty Ltd
AUD Ordinary
Bupa HI Holdings Pty Ltd
AUD Ordinary
Bupa HI Pty Ltd
AUD Ordinary
Bupa Innovations (ANZ) Pty Ltd
AUD Ordinary
Bupa Medical (GP) Pty Ltd
AUD Ordinary
Bupa Medical Services Pty Limited
AUD Ordinary
Bupa Optical Pty Ltd
AUD Ordinary
Bupa Telehealth Pty Ltd
AUD Ordinary
Bupa Wellness Pty Limited
AUD Ordinary
DC Holdings WA Pty Ltd
AUD Ordinary
Dental Care Network Pty Ltd
AUD Ordinary
Dental Corporation Australia Fair Pty Ltd
AUD Ordinary
Dental Corporation Cox Pty Ltd
AUD Ordinary
Dental Corporation Gerber Pty Ltd
AUD Ordinary
Dental Corporation Holdings Pty Ltd
AUD Ordinary
Dental Corporation Levas Pty.Ltd.
AUD Ordinary
Dental Corporation Petrie Pty.Ltd.
AUD Ordinary
Dental Corporation Pty Ltd
AUD Ordinary
Dr Chris Hardwicke Pty.Ltd.
AUD Ordinary
Gerber Dental Group Pty Ltd
AUD Ordinary
Larry Benge Pty Limited
AUD Ordinary
Scott Petrie (Dental) Pty Ltd
AUD Class E, AUD Class
F, AUD Ordinary
Bahrain
Office 207, Building 114, Road 385, Block 304, Manama, Bahrain
Bupa Middle East Holdings Two W.L.L.
BHD50.00 Ordinary
75.00
75.00
Bermuda
Crawford House, 4th Floor, 50 Cedar Avenue, Hamilton, HM11, Bermuda
Amedex Insurance Company (Bermuda) Limited
BMD1.00 Ordinary
Bolivia
Guapomo Street 2005, Spazio Building, 1st Floor, Offices 201-202-2013, Santa Cruz de la Sierra, Bolivia
Bupa Insurance (Bolivia) S.A
BOB100.00 Ordinary
Brazil
Alameda Mamoré, No. 678, 11th Floor, Room 1104, Alphaville, 06454-040, Barueri, São Paulo, Brazil
Care Plus Negócios Em Saúde Ltda.
BRL1.00 Quotas
Alameda Mamoré, No. 687, 12th Floor, Rooms 1201, 1202, 1203 and 1204, Alphaville, 06454-040, Barueri, São Paulo,
Brazil
Care Plus Medicina Assistencial Ltda.
BRL1.00 Quotas
Av. das Nações Unidas, 12,901, Unidade 901, Torre Oeste, Bloco C, Centro Empresarial Nações Unidas, Brooklin
Paulista, São Paulo, SP, Brazil
Personal System Serviços Médicos e Odontológicos Ltda.
BRL1.00 Quotas
Financial Statements of the Company
for the year ended 31 December 2022
138
Name
Share class
Proportion of
class held (%)
Effective %
ownership
Chile
Anabaena N° 336, Comuna Viña del Mar, Region Valparaiso, Chile
Clinica Renaca S.A.
CLP Ordinary
100.00
95.88
Desarrollo E Inversiones Medicas S.A.
CLP Ordinary
97.59
93.45
Promotora De Salud S.A.
CLP Ordinary
67.03
67.03
Sociedad Medica Imageneologia Clinica Renaca Limitada
CLP Social Rights
80.00
76.70
Av. Matta No 1868, Comuna Antofagasta, Region Antofagasta, Chile
Sociedad Medico Quirurgica De Antofagasta S.A.
CLP Ordinary
100.00
72.98
Cerro Colorado N° 5240, Piso 11, Comuna Las Condes, Region Metropolitana, Chile
Bupa Administracion y Servicios SpA
CLP Ordinary
Bupa Chile S.A.
CLP Ordinary
Bupa Compania de Seguros de Vida S.A.
CLP Ordinary
Bupa Inversiones Latam S.A.
CLP Ordinary
Clinica Bupa Santiago S.A.
CLP Ordinary
Examenes De Laboratorio S.A.
CLP Ordinary
100.00
99.99
Grupo Bupa Sanitas Chile Uno, SpA
CLP1,000.00 Ordinary
Inversiones Clinicas CBS S.A.
CLP Ordinary
Isapre Cruz Blanca S.A.
CLP Ordinary
99.80
99.41
Cerro Colorado N° 5240, Piso 6, Comuna Las Condes, Region Metropolitana, Chile
Bupa Servicios de Salud SpA
CLP Ordinary
100.00
99.99
Integramedica S.A.
CLP Ordinary
99.99
99.99
Recaumed S.A.
CLP Ordinary
58.40
58.40
Sonorad II S.A.
CLP Ordinary
100.00
99.89
Dr. Juan Noe N° 1370, Comuna Arica, Region Arica y Parinacota, Chile
Corporacion Medica de Arica S.A.
CLP Ordinary
68.97
68.97
Sociedad De Inversiones Pacasbra S.A.
CLP Ordinary
100.00
69.19
Manuel Antonio Matta N° 1868, Comuna Antofagasta, Region Antofagasta, Chile
Inmobiliaria Centro Medico Antofagasta S.A.
CLP Ordinary
99.99
88.94
Manuel Antonio Matta N° 1945, Comuna Antofagasta, Region Antofagasta, Chile
Centro Medico Antofagasta S.A.
CLP Ordinary
100.00
88.95
Inversiones Clinicas Pukara S.A.
CLP Ordinary
88.95
88.95
Servicios Y Abastecimiento A Clinicas S.A.
CLP Ordinary
100.00
88.92
Pedro Aguirre Piso 5, Cerda N° 843, Comuna Arica, Region Arica y Parinacota, Chile
Centro De Diagnostico Avanzado San Jose S.A.
CLP Ordinary
100.00
68.98
China
Suite 07-2, 08, 4F Fortune Financial Center, No 5 Dongsanhuan Zhong Road, Chaoyang District Beijing, 100020,
China
Bupa Consulting (Beijing) Co. Ltd.
HKD1.00 Ordinary
Unit 03, 13/F, No.604 RenMin North Road, Yuexiu District, Guangzhou, China
Guangzhou Bupa Hospital Management Company Limited
CNY1.00 Ordinary
Unit 305A -305, 3/F, GT Land Autumn Plaza, No.11, 13 ZhuJiang East Road, ZhuJiang New Town, Tianhe District,
Guangdong Province, China
Guangzhou Bupa Quality HealthCare General Outpatient
Department Company Limited
CNY1.00 Ordinary
Financial Statements of the Company
for the year ended 31 December 2022
139
Name
Share class
Proportion of
class held (%)
Effective %
ownership
Denmark
Palaegade 8, 1261 Copenhagen K, Denmark
Bupa Denmark Services A/S¹
DKK100.00 Ordinary
Dominican Republic
Av. Winston Churchill, corner with Rafael Augusto Sanchez, Plaza Acropolis, Apt. P2-D, Santo Domingo, Dominican
Republic
Bupa Dominicana, S.A.
DOP1,000.00 Ordinary
Ecuador
Av. Republica de El Salvador N34-229, 4th Floor, Quito, Ecuador
Bupa Ecuador S.A. Compania de Seguros²
USD1.00 Capital Stock
Egypt
Building 55, Street 18, Maadi, Cairo, Egypt
Bupa Egypt Insurance S.A.E.³
EGP10.00 Ordinary
Mivida Business Park, Building 3/B1, 5th Settlement, New Cairo, 11835, Egypt
Bupa Egypt Services LLC
EGP100.00 Ordinary
Guatemala
Quinta avenida número cinco guión cincuenta y cinco, Zona catorce de esta ciudad, Edificio Europlaza World
Business Center, Torre III, undécimo nivel, área corporativa número un mil, Guatemala
Bupa Guatemala, Compania de Seguros, S.A.
⁴
GTQ1.00 Ordinary
Guernsey
PO Box 155, Mill Court, La Charroterie, St Peter Port, GY1 4ET, Guernsey
Bupa Holdings (Guernsey) Limited
£1.00 Ordinary
UK Care No. 1 Limited
£1.00 Ordinary
Hong Kong
6/F & Unit Nos. 701B, 702-704 of Tower 2, The Quayside, 77 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong
Bupa (Asia) Limited
HKD10.00 Ordinary
Bupa International Limited
⁵
HKD Ordinary
Bupa Limited
HKD1.00 Ordinary
Horizon Health and Care Limited
HKD Ordinary
6/F, and Unit Nos. 701-702 and 704, Tower 1, The Quayside, 77 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong
Allied Medical Practices Guild Limited
HKD1.00 Ordinary
Central Medical Diagnostic Centre Limited
HKD1.00 Ordinary
74.49
74.49
Central MRI Centre Limited
HKD1.00 Ordinary
100.00
74.49
Central PET/CT Scan Centre Limited
HKD1.00 Ordinary
100.00
74.49
DB Health Services Limited
HKD1.00 Ordinary
Eplushealth Limited
HKD1.00 Ordinary
Jadeast Limited
⁶
HKD1.00 Ordinary
Megafaith International Limited
HKD1.00 Ordinary
Quality Healthcare Chinese Medicine Services Limited
HKD1.00 Ordinary
Quality HealthCare Dental Services Limited
HKD1.00 Ordinary
Quality Healthcare Group Limited
HKD1.00 Ordinary
Quality HealthCare Medical Centre Limited
HKD100.00 Ordinary
Quality Healthcare Medical Diagnostic & Imaging Services
Limited
HKD1.00 Ordinary
Quality HealthCare Medical Services Limited
HKD1.00 Ordinary
Quality HealthCare Nursing Agency Limited
HKD10.00 Ordinary
Financial Statements of the Company
for the year ended 31 December 2022
140
Name
Share class
Proportion of
class held (%)
Effective %
ownership
Hong Kong (continued)
Quality HealthCare Physiotherapy Services Limited
HKD1.00 Ordinary
Quality HealthCare Professional Services Limited
HKD1.00 Ordinary
Quality HealthCare Psychological Services Limited
HKD1.00 Ordinary
Quality Healthcare TPA Services Limited
HKD1.00 Ordinary
Ireland
1st Floor, 9 Exchange Place, I.F.C.S, Dublin 1, Ireland
GK Medical and Dental Services Limited
€1.00 Ordinary
Oasis Healthcare Holdings Ireland Limited
€1.00 Ordinary
Woodquay Dental Limited
€1.00 Ordinary
Xeon Dental Services Limited
€0.01 Ordinary
Second Floor, 10 Pembroke Place, Ballsbridge, Dublin, 4, Ireland
Bupa Global Designated Activity Company
€1.00 Ordinary
Macao
Rua De Xangai No. 175 Edif., Associacao Comercial De Macau, 11 Andar, K, Macau
Quality EAP (Macau) Limited
MOP1.00 Ordinary
Quality Healthcare Medical Services (Macau) Limited
MOP1.00 Ordinary
Mexico
Av. Xola 535, Piso 17, Col. Del Valle, Mexico City, CP 03100, Mexico
Corporativo Vitamedica, S.A. De C.V.
MXN10.00 Ordinary
Servicios Vitamedica, S.A. De C.V.
MXN10.00 Ordinary
Vitamedica Administradora, S.A. De C.V.
MXN Class I, Series A
(Fixed), MXN Class I,
Series B (Fixed)
Avenida Ejercito Nacional Numero 843-B, Edificio Corporativo Antara I, Piso 9, Colonia Granada, Alcaldia Miguel
Hidalgo, C.P. 11520, Mexico
Bupa Mexico, Compania de Seguros, S.A. de C.V.
MXN1,000.00 Capital
Stock Series E (fixed),
MXN1,000.00 Capital
Stock Series M (variable)
Bupa Servicios de Evaluacion Medica, S. de R.L. de C.V.
⁷
MXN Ordinary, MXN
Ordinary (Variable)
Prolongacion Paseo de la Reforma No. 9, Paseo de las Lomas, Alvaro Obregon, C.P. 01330, Mexico City, Mexico
Promotora de Hospitales y Servicios Integrales, S.A.P.I. de C.V.
MXN Fixed Capital Class
I, MXN Variable Capital
Class II
New Zealand
Bupa House, Level 2, 109 Carlton Gore Road, Newmarket, Auckland, 1023, New Zealand
Bupa Care Services NZ Limited
NZD Ordinary
Bupa Retirement Villages Limited
NZD Ordinary
Panama
Prime Time Tower, Floor 25, Office 25 b La Rotonda Ave, Costa del Este, Panama
Bupa Panama S.A.
US$1,000.00 Ordinary
Bupa Servicios Panama, S.A.
US$1.00 Common
Financial Statements of the Company
for the year ended 31 December 2022
141
Name
Share class
Proportion of
class held (%)
Effective %
ownership
Peru
Av. Guardia Civil N° 664, Comuna San Isidro, Region Lima, Peru
Anglolab S.A
PEN Ordinary-A
100.00
85.00
PEN Ordinary-B
50.00
Integramedica Peru S.A.C.
PEN Ordinary
MediPeru S.A.C
PEN Ordinary
99.97
99.97
Poland
Brzeska 12 Street, 03-737, Warsaw, Poland
Centrum Edukacji Medycznej Sp. z.o.o.
PLN100.00 Ordinary
Curie-Sklodowskiej 73 Street, 87-100, Torun, Poland
Lecznice Citomed Sp. z.o.o.
PLN50.00 Ordinary
Czapliniecka 93/95, 97-400, Belchatow, Poland
Megamed Sp. z.o.o.
PLN1,000.00 Ordinary
Goszczyńskiego 1 Street, 02-616, Warsaw, Poland
Hifu Clinic Sp. z.o.o.
PLN50.00 Ordinary
70.16
70.16
Szpital sw. Elzbiety - Mokotowskie Centrum Medyczne Sp.
z.o.o.
PLN50.00 Ordinary
Kuznicka 1 Street, 72-010, Police, Poland
Medika Uslugi Medyczne Sp. z.o.o.
PLN50.00 Ordinary
Obornicka 262 Street, 60-693, Poznan, Poland
Med-Polonia Sp. z.o.o.
PLN50.00 Ordinary
Partyzantow 76, 80-254, Gdansk, Poland
Projekt Usmiech Bis Sp. z.o.o.
PLN500.00 Ordinary
Podleśna 61, 01-673, Warsaw, Poland
Centrum Medyczne Mavit Sp. z.o.o.
PLN100.00 Ordinary
Porebskiego 9 Street, 81-185, Gdynia, Poland
Niepubliczny Zaklad Opieki Zdrowotnej Przychodnia Lekarska
"POGORZE" Sp. z.o.o.
PLN200.00 Ordinary
95.80
95.80
Pory 78 Street, 02-757 Warsaw, Poland
Pory 78 Sp. z.o.o.
PLN100.00 Ordinary
Sport Medica S.A.
PLN1.00 Ordinary-A,
PLN1.00 Ordinary-B,
PLN1.00 Ordinary-C,
PLN1.00 Ordinary-D,
PLN1.00 Ordinary-E,
PLN1.00 Ordinary-F,
PLN1.00 Ordinary-G,
PLN1.00 Ordinary-I,
PLN1.00 Ordinary-J,
PLN1.00 Ordinary-K
Pulawska 48, 05-500 Piaseczno, Poland
Silver Dental Clinic Sp. z.o.o.
PLN50.00 Ordinary
Financial Statements of the Company
for the year ended 31 December 2022
142
Name
Share class
Proportion of
class held (%)
Effective %
ownership
Poland (continued)
Rowninna 6 Street, 87-100, Torun, Poland
Citomed Nieruchomosci Sp. z.o.o.
PLN100.00 Ordinary
Szamocka 6 Street, 01-748, Warsaw, Poland
LUX MED Onkologia Sp. z.o.o.
PLN50.00 Ordinary
ul. Aleje Jerozolimskie 99/44 Street, 02-001, Warsaw, Poland
ApteGo Sp. z.o.o.
PLN50.00 Ordinary
51.00
51.00
ul. Dluga 43, 05-510 Konstancin Jeziorna, Poland
LUX MED Tabita Sp. z.o.o.
PLN100.00 Ordinary
88.00
88.00
ul. Elblaska 135, 80-718, Gdansk, Poland
Centrum Opieki Medycznej Comed Sp. z.o.o.
PLN500.00 Ordinary
ul. Kamienna 21, 31-403, Krakow, Poland
Medtour Sp. z.o.o.
PLN50.00 Ordinary
ul. Postepu 21 C Street, 02-676, Warsaw, Poland
Elblaska Sp. z.o.o.
PLN50.00 Ordinary
LUX MED Foundation Dr. Joanny Perkowicz
Founder Contribution
LUX MED Sp. z.o.o.
PLN500.00 Ordinary
LUX-MED Investment S.A.
PLN50.00 Series A,
PLN50.00 Series B,
PLN50.00 Series C,
PLN50.00 Series D
ul. Rakoczego 19/U5, 80-286, Gdansk, Poland
Mediss Dental Clinic Sp. z.o.o.
PLN250.00 Ordinary
ul. Stefana Batorego 17/19, 87-100 Torun, Poland
Tomograf Sp. z.o.o.
PLN500.00 Ordinary
Wileńska , 44 Street , 80-215 , Gdańsk
Fundacja Promedicine
Founder Contribution
Swissmed Centrum Zdrowia S.A.
PLN10.00 Ordinary
91.98
91.98
Swissmed Nieruchomosci Sp. z.o.o.
PLN500.00 Ordinary
100.00
91.98
Swissmed Opieka Sp. z.o.o.
PLN1,000.00 Ordinary
99.24
91.28
Wladyslawa Broniewskiego 3, 01-785, Warsaw, Poland
Klinika Optimum Sp. z.o.o.
PLN50.00 Ordinary
Zygmunta Slominskiego, 5/U05 Street, Warsaw, Poland
Smile Design Clinic Sp. z.o.o.
PLN100.00 Ordinary
Saint Kitts and Nevis
Amory Building, Victoria Road, Basseterre, St. Kitts, Saint Kitts and Nevis
Amedex Services Ltd. (St Kitts)
US$1.00 Capital Stock
Singapore
600, North Bridge Road, #05-01 Parkview Square, 188778, Singapore
Bupa Singapore Holdings Pte Ltd
SGD Ordinary
Financial Statements of the Company
for the year ended 31 December 2022
143
Name
Share class
Proportion of
class held (%)
Effective %
ownership
Spain
Avda Marcelo Celayeta, 144 - Pamplona (31014), Spain
Sanitas Mayores Navarra S.L.
€60.10 Ordinary
Avenida Generalitat Valenciana no 50, Valencia, Spain
Especializada y Primaria L'Horta-Manises, S.A.U.
€1.00 Ordinary
c/ Eguskiaguirre no.8, 48902, Baracaldo, Bilbao, Spain
Sanitas Mayores Pais Vasco S.A.
€120.00 Ordinary
Calle Ribera Del Loira, 52, 28042, Madrid, Spain
Elegimosalud S.L.U
€1.00 Ordinary
Fundacion Sanitas
⁸
€1.00 Contribution
100.00
99.92
Fundacion Sanitas Hospitales Para el Desarrollo de la
Investigacion y la Innovacion Medica
Founder Contribution
Grupo Bupa Sanitas S.L.U.
€100.00 Ordinary
Sanitas Emision S.L.U.
€1.00 Ordinary
Sanitas Holding, S.L.U.
€1.00 Ordinary
Sanitas Mayores S.L.
€651.28 Ordinary
Sanitas Nuevos Negocios S.L.U.
€1.00 Ordinary
Sanitas S.A. de Seguros
€0.68 Ordinary
99.92
99.92
Sanitas S.L. de Diversificacion S.U.
€6.02 Ordinary
Sanitas, S.A. de Hospitales S.U.
€6.01 Ordinary
Sweden
Box 27093, 102 51, Stockholm, Sweden
LMG Forsakrings AB
€1,000.00 Ordinary
Türkiye
Küçükbakkalköy Mah. Basar Sok, No: 20 Atasehir, Istanbul, 34750, Türkiye
Bupa Acibadem Sigorta A.S.
TRY1.00 Ordinary
Bupa Turkey Sağlık Hizmetleri A.S.
TRY1,000.00 Ordinary
Sencard Direkt Satis Sigorta Araciligi A.S.
TRY1.00 Ordinary
United Arab Emirates
Unit C1204, Level 12, Burj Daman, DIFC, PO Box 507019, Dubai, United Arab Emirates
Bupa Global Middle East (DIFC) Limited
US$1.00 Ordinary
United Kingdom
1 Angel Court, London, EC2R 7HJ, United Kingdom
ANS 2003 Limited¹
£0.01 Ordinary
ANS Limited
£0.10 Ordinary
Bede Village Management Limited
£1.00 Ordinary
Bridge Health Investments Limited¹
£1.00 Ordinary
Bupa Care Homes (AKW) Limited
£1.00 Ordinary
Bupa Care Homes (ANS) Limited
£1.00 Ordinary, £1.00
Special Share
Bupa Care Homes (Bedfordshire) Limited
£1.00 Ordinary
Bupa Care Homes (BNH) Limited
£1.00 Ordinary
Bupa Care Homes (CFCHomes) Limited
£1.00 Ordinary
Bupa Care Homes (CFG) plc¹
£0.25 Ordinary
Bupa Care Homes (CFHCare) Limited
€0.000001 Redeemable
Preference, £1.00
Ordinary
Bupa Care Homes (Developments) Limited
£1.00 Ordinary
Financial Statements of the Company
for the year ended 31 December 2022
144
Name
Share class
Proportion of
class held (%)
Effective %
ownership
United Kingdom (continued)
Bupa Care Homes (GL) Limited
£1.00 Ordinary
Bupa Care Homes (HH Bradford) Limited
£1.00 Ordinary
Bupa Care Homes (HH Hull) Limited
£1.00 Ordinary
Bupa Care Homes (HH Leeds) Limited
£1.00 Ordinary
Bupa Care Homes (HH Northumberland) Limited
£1.00 Ordinary
Bupa Care Homes (HH Scunthorpe) Limited
£1.00 Ordinary
Bupa Care Homes (HH) Limited
£1.00 Ordinary
Bupa Care Homes (Holdings) Limited¹
£1.00 Ordinary
Bupa Care Homes (Partnerships) Limited
£1.00 Ordinary
Bupa Care Homes (PT Lindsay) Limited
£1.00 Ordinary
Bupa Care Homes (PT Links) Limited
£1.00 Ordinary
Bupa Care Homes Investments (Holdings) Limited¹
£1.00 Ordinary
Bupa Care Services (Commissioning) Limited
£1.00 Ordinary
Bupa Care Services Limited¹
£0.20 Ordinary
Bupa Foundation
Guarantee Membership
Interest
Bupa Global Holdings Limited
€1.00 Ordinary, €0.01
Ordinary, £1.00 Ordinary
Bupa Healthcare Services Limited¹
£1.00 Ordinary
Bupa Home Healthcare Pension Scheme Trustee Limited¹
£1.00 Ordinary
Bupa Insurance Limited¹
£1.00 Ordinary
Bupa Insurance Services Limited¹
£1.00 Ordinary
Bupa International Markets Limited
£1.00 Ordinary
Bupa Investments Limited¹
£1.00 Ordinary
Bupa Investments Overseas Limited¹
AUD Redeemable
Preference, CLP1.00
Redeemable Preference,
£1.00 Ordinary
Bupa Limited
£1.00 Ordinary
Bupa Occupational Health Limited
£1.00 Ordinary
Bupa Pension Scheme Trustees Limited¹
£1.00 Ordinary
Bupa Secretaries Limited
£1.00 Ordinary
Bupa Trustees Limited
£1.00 Ordinary
Cromwell Hospital Retirement Plan Trustee Limited¹
£1.00 Ordinary
Occupational Health Care Limited
£1.00 Ordinary, £1.00
Redeemable Preference
Richmond Care Villages (Property) Limited
£1.00 Ordinary
Richmond Care Villages Holdings Limited¹
£1.00 Ordinary
Richmond Coventry Limited
£1.00 Ordinary
Richmond Letcombe Limited
£1.00 Ordinary
Richmond Nantwich Developments Limited
£1.00 Ordinary
Richmond Nantwich Limited
£1.00 Ordinary
Richmond Nantwich Properties Limited
£1.00 Ordinary
Richmond Northampton Limited
£1.00 Ordinary
Richmond Northampton Management Limited
£1.00 Ordinary
Richmond Painswick Management Company Limited
£1.00 Ordinary
Richmond Villages Operations Limited
£1.00 Ordinary
13 Queens Road, Aberdeen, Aberdeenshire, AB15 4YL, United Kingdom
Hillington Park Dental Practice Limited
£1.00 Ordinary
MFM Community Limited
£1.00 Ordinary
Bupa Dental Care, Vantage Office Park, Old Gloucester Road, Hambrook, Bristol, BS16 1GW, United Kingdom
A4 Health Group Limited
£1.00 Ordinary
Aesthetic Dental Laboratory Limited
£1.00 Ordinary
Financial Statements of the Company
for the year ended 31 December 2022
145
Name
Share class
Proportion of
class held (%)
Effective %
ownership
United Kingdom (continued)
Apex Dental Care Limited
£1.00 Ordinary
Archway Dental Practice Limited
£1.00 Ordinary
Arnica Dental Care Limited
£1.00 Ordinary
Avsan Cove Limited
£1.00 Ordinary
Avsan Dental Edinburgh Limited
£1.00 Ordinary
Avsan Ferryburn Limited
£1.00 Ordinary
Avsan Fife Limited
£1.00 Ordinary
Avsan Fleet Limited
£1.00 Ordinary
Avsan Gloucester Limited
£1.00 Ordinary
Avsan Halstead Limited
£1.00 Ordinary
Avsan Knebworth Limited
£1.00 Ordinary
Avsan Kseat Limited
£1.00 Ordinary
Avsan Queenscross Limited
£1.00 Ordinary
Avsan Queensroad Limited
£1.00 Ordinary
Avsan Visage Limited
£1.00 Ordinary
B Dental Limited
£1.00 Ordinary
BASDAC (2011) LLP
Partnership Interest
BE White Ltd
£1.00 Ordinary
Bupa Dental Services Limited
£1.00 Ordinary
Caring Dentistry Ltd
£1.00 Ordinary
Cheshire Cat Orthodontics Limited
£1.00 Ordinary
Clock Tower Dental Care Limited
£1.00 Ordinary
Colchester Dental Referral Centre Limited
£1.00 Ordinary
Croft Dental Care Limited
£1.00 Ordinary
Den Dental Group Practice LLP
Partnership Interest
Dencraft (Leicester) Ltd
£1.00 Ordinary
Dencraft (South Yorkshire) Limited
£1.00 Ordinary
Dental Confidence Limited
£1.00 Ordinary
Dental Excellence - Harewood Practice LLP
Partnership Interest
Dentalign Colwyn Bay Ltd
£1.00 Ordinary
Dentalign Eastbourne Ltd
£1.00 Ordinary
Dentalign Orthodontics Limited
£1.00 Ordinary
Dentalign Orthodontics LLP
Partnership Interest
Dentalign Wrexham Ltd
£1.00 Ordinary
Derwent House Orthodontics Limited
£1.00 A Ordinary
Devon Smiles Limited
£1.00 Ordinary
Deysbrook Dental Surgery Limited
£1.00 Ordinary
Diamond House Dental Practice Limited
£1.00 Ordinary
Eckington Dental Practice Limited
£1.00 Ordinary
Eurodontic Limited
£1.00 Ordinary
Fairfield Dental Surgery Limited
£1.00 Ordinary
Freshdental Practice Limited
£1.00 Ordinary
Future Drilling Limited
£1.00 Ordinary
G & M Moynes Ltd
£1.00 Ordinary
Goodteeth Dental Surgeries Limited
£1.00 Ordinary
Grosvenor Orthodontic Clinic (Beckenham) Limited
£1.00 Ordinary
Harbour Way Surgery Limited
£1.00 A Ordinary
Haven Green Clinic Limited
£1.00 Ordinary
Highland Dental Care Limited
£1.00 Ordinary
Highwoods and St Johns Limited
£1.00 Ordinary
Highworth Dental Care Limited
£1.00 Ordinary
Hope Dental Practice Limited
£1.00 Ordinary, £1.00
Ordinary B
Hospital Lane Dental Clinic Limited
£1.00 Ordinary
Iosis Clinic Limited
£1.00 Ordinary
Financial Statements of the Company
for the year ended 31 December 2022
146
Name
Share class
Proportion of
class held (%)
Effective %
ownership
United Kingdom (continued)
J & M Dental Care Ltd
£1.00 Ordinary
J A Jordan & Associates Limited
£1.00 Ordinary
J.J. Thompson (Orthodontic Appliances) Limited
£1.00 Ordinary
James Taylor and Partners Limited
£1.00 Ordinary
JDH Holdings Limited
£0.10 Ordinary
Kidson Orthodontics Limited
£1.00 Ordinary
King Lane Dental Care Limited
£1.00 Ordinary
KN Wellness Ltd
£1.00 Ordinary
Lab 53 Limited
£1.00 Ordinary
Lawrence Street Dental Practice Limited
£1.00 Ordinary
Linden Dental Centre Limited
£1.00 Ordinary
Luke Barnett Clinic Limited
£1.00 Ordinary
Luke Barnett Limited
£1.00 Ordinary
Mainestream Dental Care Limited
£1.00 Ordinary
Mark Fazakerley (VHO) Limited
£1.00 Ordinary
MCM (Dental Services) Limited
£1.00 Ordinary
MDANZ Holdings Limited
£1.00 Ordinary
MDANZ Limited
£1.00 Ordinary
Metrodental Limited
£1.00 Ordinary
Milehouse Dental Care Limited
£1.00 Ordinary
Mojo-D Limited
£1.00 Ordinary
MZINC Limited
£0.01 Ordinary
Nigel Reynolds Limited
£1.00 Ordinary
NM Jones Ltd
£1.00 Ordinary
North Devon Orthodontic Centre Limited
£1.00 Ordinary
North Lakeland Ltd
£1.00 Ordinary
Oasis Dental Care (Central) Limited
£1.00 Ordinary
Oasis Dental Care (Southern) Holdings Limited
£0.10 Ordinary-A
Oasis Dental Care (Southern) Limited
£1.00 Ordinary
Oasis Dental Care Limited
£1.00 Ordinary
Oasis Healthcare Limited
£0.01 Ordinary
Oral Implantology Limited
£1.00 Ordinary
Ortho 2008 Limited
£1.00 Ordinary
Orthoscene Limited
£1.00 Ordinary
Oswestry Dental Laboratory Limited
£1.00 Ordinary
Peter Baldwin (VHO) Limited
£1.00 Ordinary
Priors Croft Dental Practice Limited
£1.00 Ordinary
Private Dental Services Ltd
£1.00 Ordinary
Quantum Ortho Limited
£1.00 Ordinary
Quest Dental Care LLP
Partnership Interest
Raglan Suite Limited
£1.00 Ordinary
Ratcliffe Dental Limited
£1.00 Ordinary
Richley Dental Ceramics Limited
£1.00 Ordinary
Rise Park Dental Practice Limited
£0.10 Ordinary A, £0.10
Ordinary B
Roberts-Harry Clinic Ltd
£1.00 Ordinary
Shaw & Associates Dental Surgeons Ltd
£1.00 Ordinary
Silverwell Surgery Ltd
£1.00 Ordinary
Siobhan Owen Limited
£1.00 Ordinary
Smile Dental Care Ltd
£1.00 Ordinary
Smile Lincs Limited
£1.00 Ordinary
Steeple Grange Smiles Limited
£1.00 Ordinary
Stob Dearg Limited
£1.00 Ordinary
Stop the Clock Dental Care Limited
£1.00 Ordinary
Synergy Ceramics Ltd
£1.00 Ordinary
Financial Statements of the Company
for the year ended 31 December 2022
147
Name
Share class
Proportion of
class held (%)
Effective %
ownership
United Kingdom (continued)
TDK Dental Limited
£0.50 Ordinary A
The Adams and Lee Dental Practice Ltd
£1.00 Ordinary
The Bramhope Dental Clinic Limited
£1.00 Ordinary
The Clinic Dental Facial Limited
£1.00 Ordinary
The Dental Solutions Centre Ltd
£0.02 Ordinary
The Exeter Dental Centre Limited
£1.00 Ordinary
The Facial Aesthetics & Dental Centre Ltd
£1.00 Ordinary
The Oasis Healthcare Group Limited¹
£1.00 Ordinary
The Spire Halifax Limited
£1.00 Ordinary
The Tutbury Dental Practice Limited
£1.00 Ordinary
Tidge and Lou Limited
£1.00 Ordinary
Tooth Fixer Limited
£1.00 Ordinary
Total Orthodontics Limited
£1.00 Ordinary
Wessington Way Limited
£0.10 Ordinary
Whole Tooth Limited
£1.00 Ordinary
Wimborne Total Dental Care Limited
£1.00 Ordinary
Windslade Limited
£1.00 Ordinary
Winning Smiles (Gillingham) Limited
£1.00 Ordinary
Wylde Green Orthodontics LLP
Partnership Interest
Wylye Valley Dentistry Limited
£1.00 Ordinary
Xeon Smiles UK Limited
£1.00 Ordinary
Cromwell Hospital, Cromwell Road, London, SW5 0TU
Cromwell Health Group Limited¹
£1.00 A Ordinary
Medical Services International Limited
£1.00 Ordinary
Mind Your Business (Ni) Ltd, 1 Elmfield Avenue, Warrenpoint, Newry, County Down, BT34 3HQ, Northern Ireland
Belfast Orthodontic Clinic Ltd
£1.00 Ordinary
Blueapple Dental and Implant Team Limited
£1.00 Ordinary
Cranmore Excellence in Dentistry Limited
£1.00 Ordinary
DE (Belmont Road) Ltd
£1.00 Ordinary
Fortwilliam and Ballymena Specialist Dental Clinics Limited
£1.00 Ordinary
Smiles Dental Practices North Limited
£1.00 Ordinary
Pinsent Masons Llp, 13 Queens Road, Aberdeen, AB15 4YL, United Kingdom
Martin and Martin Dental Care Limited
£1.00 Ordinary
Partick Dental Ltd.
£0.01 Ordinary
United States
17901 Old Cutler Road, Suite 400, Palmetto Bay FL 33157, United States
Bupa Insurance Company
US$1.25 Capital Stock
Bupa Investment Corporation, Inc.
US$1.00 Capital Stock
Bupa U.S. Holdings, Inc.
US$0.01 Common Stock
Bupa Worldwide Corporation
US$5.00 Capital Stock
U.S.A. Medical Services Corporation
US$5.00 Capital Stock
1.
Held directly by the Company
2.
0.000015% held by nominee
3.
0.017% held directly by the Company
4.
1% held directly by the Company
5.
0.000001% held directly by the Company’s parent
6.
In de-registration
7.
0.03% held directly by the Company
8.
The Sanitas Foundation
Financial Statements of the Company
for the year ended 31 December 2022
148
Other related undertakings
The related undertakings listed below comprise joint ventures, associated undertakings and other significant holdings. Unless
otherwise stated, the proportion of the nominal value of each share class held indirectly by the Company is shown below,
together with the Group’s effective ownership, calculated by reference to the voting rights. All joint ventures are included in the
Group consolidation using the equity method.
Name
Share class
Proportion of
class held (%)
Effective %
ownership
Australia
Level 16, 33 Exhibition Street, Melbourne VIC 3000, Australia
Mobile Dental Pty Ltd
AUD Ordinary
49.00
49.00
Chile
Manuel Antonio Matta N° 1945, Comuna Antofagasta, Region Antofagasta, Chile
Sociedad Instituto De Cardiologia Del Norte Limitada
CLP Social Rights
50.00
44.47
Pedro Aguirre Piso 5, Cerda N° 843, Comuna Arica, Region Arica y Parinacota, Chile
Centro De Imagenes Medicas Avanzadas San Jose S.A.
CLP Ordinary
70.00
48.28
Hong Kong
6/F, and Unit Nos. 701-702 and 704, Tower 1, The Quayside, 77 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong
Alpha Medical MRI (TST) Limited
HKD10,000.00 Ordinary
65.00
65.00
India
C-98 Lajpat Nagar, Part 1, New Delhi, 11002, India
Niva Bupa Health Insurance Company Limited¹
INR10.00 Ordinary
44.39
44.39
Poland
Marszalkowska 55/73/42 Street, 00-676, Warsaw, Poland
MC2 Innovations Sp. z.o.o.
PLN100.00 Ordinary
31.87
31.87
Marszalkowska 99 A lok. 5B Street, 00-693, Warsaw, Poland
Centrum Edukacyjne Medycyny Sportowej Sp. z.o.o.
PLN50.00 Ordinary
50.00
50.00
Saudi Arabia
7764 Prince Sultan St, Al Mohammediyah Dist., PO Box 260, Jeddah, 21411, Saudi Arabia
My Clinic Global Medical Company
SAR100.00 Ordinary
100.00
50.00
My Clinic International Medical Company Limited
SAR100.00 Ordinary
100.00
50.00
Nazer Bupa Medical Equipment Company Limited
SAR1,000.00 Ordinary
50.00
50.00
Al-Khalidiyah-Nour Al Ehsan 3538, Unit 1 Jeddah 7505-23423, P.O. Box 23807, Jeddah, 21436, Saudi Arabia
Bupa Arabia For Cooperative Insurance Company
SAR10.00 Ordinary
43.25
43.25
United Kingdom
1 Angel Court, London, EC2R 7HJ, United Kingdom
Fulford Grange Medical Centre Limited
£1.00 'A' Ordinary
100.00
50.00
4th Floor, 167 Fleet Street, London, EC4A 2EA, United Kingdom
Healthbox Europe 1 LP
£1.00 Partnership Capital
37.04
37.04
Swan Court, Waterman's Business Park , Kingsbury Crescent, Staines, Surrey, England, TW18 3BA, United Kingdom
Healthcode Limited²
£1.00 A Ordinary
£1.00 E Ordinary
100.00
20.00
20.00
Wilson House Waterberry Drive, Waterlooville, Hampshire, PO7 7XX, United Kingdom
London Oncology and Wellbeing Centre Limited
£1.00 B
£1.00 Ordinary
100.00
17.91
38.90
Financial Statements of the Company
for the year ended 31 December 2022
149
Name
Share Classes
Proportion of
class held (%)
Effective %
ownership
United States
745 Fort St, Ste 1100, Honolulu, HI 96813, United States
HTH Re, Ltd
US$1.00 Ordinary
100.00
49.00
933 First Avenue, King of Prussia PA 19406, United States
Highway to Health, Inc
US$0.01 Ordinary
49.00
49.00
HTH Worldwide, LLC
US$1.00 Ordinary
100.00
49.00
Worldwide Insurance Services, LLC
US$1.00 Ordinary
100.00
49.00
1.
Part held by nominees
2.
Held directly by the Company
Financial Statements of the Company
for the year ended 31 December 2022
150
The five-year financial summary is presented to better understand trends.
2022
2021
2020
(restated)¹
2019
(restated)¹
2018
(restated)¹
£m
£m
£m
£m
£m
Revenue - segmental analysis
Bupa Asia Pacific
5,638
5,498
5,249
5,136
5,069
Europe and Latin America
4,560
4,004
3,765
3,853
3,499
Bupa Global and United Kingdom
3,752
3,396
3,122
3,323
3,288
Other businesses
7
5
6
4
4
Net reclassifications to other expenses or financial income and
expenses
–
–
–
–
(1)
Consolidated total revenues
13,957
12,903
12,142
12,316
11,859
Claims and expenses
Operating expenses (including claims)
(13,245)
(12,296)
(11,532)
(11,733)
(11,112)
Impairment of goodwill
(609)
(6)
–
(422)
(35)
Impairment of other intangible assets arising on business
combinations
(285)
(21)
(18)
(21)
(4)
Other income and charges
(39)
49
1
(42)
(53)
Total claims and expenses
(14,178)
(12,274)
(11,549)
(12,218)
(11,204)
(Loss)/profit before financial income and expense
(221)
629
593
98
655
Net financial expense
(85)
(92)
(105)
(63)
(41)
(Loss)/profit before taxation expense
(306)
537
488
35
614
Taxation expense
(112)
(99)
(112)
(154)
(211)
(Loss)/profit for the year
(418)
438
376
(119)
403
Attributable to:
Shareholder of Bupa Finance plc
(421)
435
374
(121)
397
Non-controlling interests
3
3
2
2
6
(Loss)/profit for the year
(418)
438
376
(119)
403
Equity
Share capital
200
200
200
200
200
Property revaluation reserve
634
655
699
692
700
Income and expenditure reserve
5,289
5,884
5,498
5,310
5,640
Cash flow hedge reserve
–
–
21
21
20
Foreign exchange translation reserve
453
(13)
263
237
464
Equity attributable to shareholder of Bupa Finance plc
6,576
6,726
6,681
6,460
7,024
Restricted Tier 1 notes
297
297
–
–
–
Non-controlling interests
20
17
18
17
20
Total equity
6,893
7,040
6,699
6,477
7,044
1.
Amounts for 2018-2020 are shown on the current segmental basis.
Five-year financial summary (unaudited)
151