BUPA FINANCE PLC

(Company number 2779134)

Directors' report and financial statements

for the financial year ended 31 December 2023

Contents

Page

Directors and officers

2

Strategic Report

3

Governance Report

19

Independent auditors’ report to the members of Bupa Finance plc

24

Consolidated Financial Statements

36

Notes to the Consolidated Financial Statements

42

Bupa Finance plc Company Accounts

113

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

C Binmore

G M Evans

S M Fielding

J A Lenton

Company Secretary

C R Campbell

Registered Office

EC2R 7HJ

Auditors

PricewaterhouseCoopers LLP

Bupa Finance plc

Registered number: 2779134

2

The Directors present their Report for the year ended 31 December 2023 for Bupa Finance plc, a company registered in

England as a public company limited by shares (the ‘Company’), and its subsidiary companies (together referred to as the

‘Group’). The immediate and ultimate parent of the Company is The British United Provident Association Limited (the ‘Parent’)

which is also the ultimate parent company of the Bupa Group ('Bupa’).

Strategic Report

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 50 million customers worldwide

1

. With no shareholders, Bupa Group reinvests profits into

providing more and better healthcare for the benefit of current and future customers.

Through 2023, we directly employed around 87,000

2

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 an associate business in

Saudi Arabia. From 2024 onwards, our associate business in India, Niva Bupa, will become part of Bupa Global and UK

following the acquisition of a majority shareholding in January 2024.

Business model

Our businesses

What we do

Health insurance

•

72% of revenue

•

29.7m Insurance customers worldwide

•

Our main business is health insurance for corporate customers,

small and medium-sized enterprises (SMEs) and for individual

customers.

•

We provide health insurance and funding products to customers

in the UK, Australia, Spain, Chile, Poland, Hong Kong SAR,

Türkiye, Brazil and Mexico and via our associate businesses in

Saudi Arabia and India.

•

We also offer international private medical insurance (IPMI)

through our Bupa Global businesses.

•

We provide dental insurance in Australia, the UK, Spain, Chile,

Poland, Hong Kong SAR, Brazil and through Bupa Global.

Health Provision

•

20% of revenue

•

20.3m provision customers worldwide

•

We operate health facilities in Spain, Chile, Poland, the UK,

Brazil, Hong Kong SAR and Australia, and in our associate

business in Saudi Arabia. Services include health assessments,

GP services, physiotherapy and outpatient clinics.

•

We provide digital GP services, care triage and consultation,

mental health coaching and support, and chronic care

management. We provide optical services in Australia.

•

We run hospitals in Spain, Mexico, Chile, Poland and the UK.

•

We have dental centres across the UK, Ireland, Australia, Spain,

Chile, Poland, Brazil and Hong Kong SAR.

Aged care

•

8% of revenue

•

20,846 residents in our care homes

•

Our aged care services comprise care homes, retirement

villages, day centres and home care.

•

We provide care to our residents in Australia, New Zealand, the

UK and Spain.

Financial headlines

3

•

Revenue

4,5

of £15.1bn was up 9% (2022: £13.9bn) at Constant Exchange Rates (CER)

6

with period-on-period growth

across all lines of business and Market Units driven by:

Strategic Report

For the year ended 31 December 2023

3

1

Customer counting methodologies may vary between Business Units.

2

Based on average number of employees during the year and including 16,000 colleagues in Poland who are engaged under contract for service arrangements.

3

Financial results are based on the new accounting standard for insurance contracts, IFRS 17 and the updated definition of underlying profit, with prior period

comparators restated where applicable. See Note 1.5 for further detail.

4

Revenues from associate businesses are excluded from reported figures. Customer numbers include 100% of our associate figures. Economic post-tax profits include

the associate contribution in line with our shareholding.

5

Revenue calculated based on the aggregation of “insurance revenue” and “total non-insurance revenue” as shown in the Consolidated Income Statement.

6

Constant exchange rate (CER) financials are the retranslation of the prior year Actual Exchange Rates (AER) financials based on the current financial years average

rate.

◦

Customer volume growth with health insurance customers increasing by over five million

7

and provision

customers by one million. Occupancy rates in aged care increasing by 4ppt to 92% exceeding pre-COVID

levels (2019: 88%); and

◦

The impact of pricing action, as we seek to balance elevated levels of inflation, remaining competitive for

our customers and maintaining discipline in our underwriting of insurance risk.

•

Underlying profit

8

before taxation of £747m, was up 2% at CER (2022: £730m) as strong customer growth and higher

investment returns were offset by lower profits in Australia Health Insurance, due to timing differences between the

recognition of COVID-19 claims savings and returns made to customers as part of our COVID-19 support programme

introduced during the pandemic. In 2023 the cost of returning claim savings (accumulated through the pandemic) to

customers increased to £312m (2022: £240m)

9

. The amount of COVID-19 claim savings realised diminished in 2023

relative to 2022 as claims frequency increased following the pandemic. In 2022 we also recognised £117m of tangible

asset impairments in UK Dental, which was not repeated in 2023.

•

Statutory profit before taxation of £717m increased by £986m at AER (2022: £(269)m loss) driven by a significant

reduction in non-underlying items following £888m of impairments in 2022.

•

The Bupa Group's Solvency II capital coverage ratio remains strong at 175%

10

(2022: 181%).

•

The leverage ratio (excluding IFRS 16 lease liabilities) is 20.6% (2022: 19.4%).

•

Full Year 2023 results demonstrate that our strategy is delivering strong results with broad-based growth across all

lines of business and Market Units against a backdrop of continued macro-economic, political and regulatory

uncertainty.

Financial position

•

The Bupa Group's Solvency II capital coverage ratio remained strong at 175% (2022: 181%).

•

Leverage ratio is 27.9% (2022: 27.3%) when including IFRS 16 lease liabilities. Excluding these liabilities, the

leverage ratio is 20.6% (2022: 19.4%). In the first half of the year we repaid £250m of Tier 2 debt at maturity and we

issued a €500m senior bond in October.

•

Net cash generated from operating activities increased by £265m period-on-period to £1,304m, driven by higher

revenue, partly offset by the reduction in Australia Health Insurance profits.

Note on Chile

•

As disclosed previously, Bupa’s Isapre business in Chile has been negatively impacted by judicial and regulatory

action. The Chilean Supreme Court has significantly shifted its interpretation of Isapre pricing in recent years, with the

cumulative effect of restricting the previously permitted, and generally accepted, pricing/rate-setting approach. The

potential short and long-term implications for Bupa’s Isapre business remain highly uncertain, however, some recent

developments suggest that a revised pricing framework could emerge to support the sustainability of the industry.

•

In the meantime, we continue to recognise contingent liabilities regarding the potential retrospective financial

implications relating to the Isapre business. Further details are included in the Financial Review.

BUPA GROUP CEO's UPDATE

Bupa had a very strong year in 2023. We are making good progress on delivering against our strategy with strong organic

growth across our health insurance businesses, increased occupancy in our aged care homes and villages, and increased

activity in our health provision businesses to meet growing customer demand.

We are encouraged by the overall performance of the Group as we continue our transformation to become an increasingly

digital business serving our customers, patients and residents.

I would like to thank all our people at Bupa who have worked incredibly hard to support our customers and transform the

business. Throughout the year, our teams have been focused on ‘running’ and ‘changing’ Bupa – continuing to run the

organisation efficiently and prioritising high standards of customer service while at the same time changing our business with a

focus on digital transformation. This has delivered strong performance across the organisation with our strategy driving positive

improvements and organic customer growth.

Significant progress in 2023

This year’s results demonstrate that our 3x6 strategy is the right one and delivering strong results:

•

In health insurance, customer numbers grew 22%

11

as our market-leading propositions position us well to serve more

customers with an increasing focus on health and wellness.

•

In health provision, we saw good customer growth and a strong increase in profitability. Notably in UK Dental we have

seen improved business performance as the business delivers against the early stages of its turnaround plan.

Strategic Report

For the year ended 31 December 2023

4

7

Includes customer numbers for associate businesses.

8

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 period-on-period comparison. A reconciliation to statutory profit before taxation can be found in

the notes to the financial statements.

9

Note variance to Full Year 2022 disclosures relates to change in accounting for premium rate deferrals under IFRS 17. Previously expensed as incurred but now restated

and recognised over the duration of the contract to which the deferral relates.

10

The FY 2023 Solvency II capital coverage ratio is an estimate and unaudited.

11

Includes customers from Associate insurance businesses.

•

And in aged care, we have reached an important milestone as a sharp focus on the business fundamentals has seen

occupancy exceed pre COVID-19 pandemic levels.

12

Our specialist healthcare focus, international footprint and trusted clinical expertise puts us in a strong position in a sector with

long-term rising demand. This has seen our insurance customer base, including associates grow to 29.7m, which is 22% higher

than in 2022.

We have delivered thousands of customer experience improvements across key parts of the customer journey and continue to

increase our focus on digital transformation. We now have over 5.5 million customers using Blua

13

, our innovative digital health

solution.

During the year, I was able to visit many of our teams in our different markets. While virtual meetings are an effective means of

communicating, it is important to meet our people and our customers in person. I’ve visited our businesses in countries

including Spain, Poland, Mexico, Saudi Arabia, Australia, India and the UK, and have been impressed by the energy,

commitment and care shown by all our colleagues.

I’m very proud of the strong leadership community we have built at Bupa. Our Strategic Development Forum is the group of our

75 most senior people from across every business who meet quarterly and which are driving the execution of our strategy. This

team is the best lever we have to maintain the momentum of our transformation.

Strategic progress

Bupa’s 3x6 strategy is centred around three bold ambitions focused on digitalisation and customer experience and six strategic

and enabling pillars. Over 2023, we made good progress, including:

•

Customer:

In 2023, 87% of our Business Units improved their Net Promoter Score (NPS). We also implemented over

8,000 customer experience improvements across key parts of the vital customer journeys.

•

Growth:

We have 20.3m provision customers, 6% growth from last year and 29.7m health insurance customers

14

,

reflecting a 22% growth from 2022.

•

Transformation:

We now have over 5.5 million Blua customers globally, with plans to significantly increase this going

forward. These customers are being served by our growing network of around 14,000 doctors and clinicians.

•

Sustainability:

We launched our Healthy Cities programme globally, which saw 80,000 people, including our

employees, customers and community partners take 10 billion steps throughout 2023, in turn unlocking £2 million of

funding for local nature regeneration projects in urban areas.

•

Agile Culture:

457 leaders globally are listening to customer feedback via our internal listening app in almost every

business. 61,000 customer calls listened to, and 23,500 ideas generated for how we can improve our customer

experience.

•

Data:

Over 12,000 of our people are accessing and using data from our platforms to drive decision-making, and in

2023, 120 teams across 20 countries participated in the B-Disruptive Hackathon, upskilling Bupa’s workforce in

Generative AI.

Sustainability highlights

As an international healthcare company, the interconnection between human health and the health of the planet is core to our

strategy. In 2023, we made notable progress in decarbonising our operations and accelerating critical collaborations to shape

the delivery of net zero, patient-centric health systems, including Bupa joining the Sustainable Markets Initiative Health Systems

Taskforce and a global partnership with Health Care Without Harm. We also expanded our Healthy Cities programme to all our

Market Units, encouraging people to adopt sustainable and healthy lifestyles, while investing in regenerating urban

environments for people to thrive. Here are some of our other highlights:

•

Our global talent and innovation programme eco-Disruptive continued into its third year, engaging more than 270

start-up applicants and 18 finalists. We awarded £200,000 to the winning start-up, UniSCool, who have pioneered a

liquid cooling solution which reduces the energy use of electrical appliances including medical equipment. They will

continue to work with Bupa employees to drive sustainability action.

•

We expanded our international-level advocacy and partnerships, including a three-year partnership with the Norman

Foster Foundation to create healthy and climate-resilient cities.

Outlook

We are encouraged by the overall positive performance across the Group and how our businesses are transforming against the

strategic priorities they are given as part of our portfolio management strategy.

I’ve been particularly energised by my visits to India, where I’ve spent time with the team at Niva Bupa. In 2023, we began the

process to increase our stake in the business to become the majority shareholder of one of the fastest growing companies in

the Indian health insurance industry. This completed in January 2024. I am very impressed with what the Niva Bupa team have

achieved to date. It is a vibrant and exciting market, and we see huge opportunities to serve more customers and grow the

business and the market over the coming years.

The macro-economic, political and regulatory outlook remains uncertain. We continue to see elevated levels of inflation

increasing costs for our business and for our customers in certain markets. As stated in the Business Risk section, changes in

governmental and regulatory policy continue to be one of our top risks given the nature of our business. This risk is present in

Strategic Report

For the year ended 31 December 2023

5

12

Pre COVID-19 levels based on 2019 closing occupancy.

13

5.5 million customers are using Blua, our digital healthcare service, or an equivalent digital solution.

14

Includes customer numbers for associate businesses.

Chile, where the Isapre insurance industry continues to be negatively impacted by political uncertainty, potential changes in law

and regulatory and judicial action. This results in Contingent Liabilities being recognised as at 31 December 2023, as

summarised in the financial review.

We are confident for the future of our business, there is positive momentum behind our 3x6 strategy and our ambition to be the

world's most customer-centric healthcare company. There is much to do, but we are well positioned to meet customer

healthcare needs with an ever-increasing focus on health and wellbeing across our markets.

MARKET UNIT PERFORMANCE

Asia Pacific

Revenue

Underlying profit

2023

£5,726m

£151m

2022 (AER)

£5,716m

£424m

% growth/(decline)

–%

(64)%

2022 (CER)

£5,454m

£400m

% growth/(decline)

5%

(62)%

Health insurance

customers (m)

Healthcare provision

customers (m)

Aged care residents

2023

4.7

2.6

8,600

(Commentary on a CER basis)

Revenue in our Asia Pacific Market Unit increased by 5% to £5,726m driven by new Australia Health Insurance members, an

increase in Australia and New Zealand aged care occupancy, and higher utilisation in Hong Kong Health Services. Revenues

were reduced by £312m (2022: £240m) as a result of returning claim savings to customers via cash givebacks (£211m) and

premium rate deferrals (£101m). This takes the total support provided to customers since the pandemic started to £0.7bn.

Overall Asia Pacific profits reduced, due to timing differences between the recognition of COVID-19 claims savings and returns

to customers in Australia Health Insurance.

In Australia Health Insurance, revenues increased by 6% (when excluding the impact of COVID-19 claims savings returned to

customers) as a result of growth in domestic and international customers and the November 2022 (deferred from 1 April 2022)

and October 2023 (deferred from 1 April 2023) premium rate increases. On a reported basis, the combined operating ratio

(COR) increased to 98% (2022: 89%) due to the impact of timing differences between the recognition and return of COVID-19

claims savings to customers.

Australia Health Insurance increased its domestic market share in the December 2023 quarter, delivering five consecutive

quarters of market share growth. We remain committed to finding ways for our members to get the best value from their health

insurance in the face of cost-of-living pressures. Key propositions included: the Members First Ultimate Dental market leading

proposition, providing Bupa members free access to fillings and check-ups exclusively at Bupa-owned dental practices; the new

Australia Health Insurance extras products offering greater choice, value and flexibility to our customers; and the 24/7 virtual/

digital Doctor programme as part of the ‘Blua’ offering we are piloting with our regional members. During 2023, the uptake of our

programmes designed to improve our customers’ health increased significantly including dietary guidance, hospital stay

preparation, and treatment recovery and to address health issues including heart attacks and strokes. In addition, Bupa signed

a three-year contract with Healthscope, Australia’s second largest private hospital group.

In Australian Health Services, revenues remained stable due to volume growth in Dental, Optical and the Australian Defence

Force contract, offset by lower assessment volumes in the Bupa Medical Visa Services business due to a change in

government regulations. Notwithstanding the underlying profit decline in Bupa Medical Visa Services due to the change in

government regulations, volumes uplifted in the later part of 2023.

In Australian Aged Care, revenues grew strongly and the business returned to profitability due to higher occupancy rates,

improved government funding and enhanced compliance as the sector continues to recover from the impacts of the COVID-19

pandemic. Closing occupancy was 91% (2022: 84%).

In New Zealand Villages and Aged Care, targeted initiatives delivered an uplift in care home occupancy to close at 91% (2022:

87%). Village Unit resales uplifted 15% relative to last year driving higher revenues and profitability, reflecting the optimised

village development strategy.

In Hong Kong, revenues increased driven by higher utilisation and the launch of seven new clinics. Insurance revenues also

grew as we launched a revised pricing and retention strategy to transform business performance. Overall, Hong Kong reported

an underlying loss due to an increase in claims utilisation in Insurance following the end of the COVID-19 pandemic. This was

partially offset by Health Services delivering a strong profit result.

Strategic Report

For the year ended 31 December 2023

6

Europe and Latin America

Revenue

Underlying profit

2023

£5,083m

£358m

2022 (AER)

£4,487m

£300m

% growth

13%

19%

2022 (CER)

£4,553m

£307m

% growth

12%

17%

Health insurance

customers (m)

Healthcare provision

customers (m)

Aged care residents

2023

5.6

13.5

5,800

(Commentary on a CER basis)

Revenue in our Europe and Latin America Market Unit grew by 12% to £5,083m as a result of strong customer growth and the

impact of pricing action as we seek to balance elevated levels of inflation, remaining competitive for our customers and

maintaining discipline in our underwriting of insurance risk. Underlying profit increased by 17% to £358m in the year, driven by

revenue growth, higher margins and increased investment returns with 2022 also being impacted by a £41m one-off Consumer

Price Index (CPI) linked performance catch-up on a long-standing public private partnership (PPP) hospital contract in Spain. In

Bupa Chile the October 2022 regulator-approved GES pricing increases returned the Isapre to a small profit for the year.

However, following an adverse court ruling cancelling the increase (effective 1 January 2024), the outlook for Isapre pricing

remains unclear.

Sanitas Seguros, our health insurance business in Spain, delivered strong revenue growth driven by increased organic

customer volumes and the impact of a new strategic alliance with Generali, which has increased customer numbers by

134,000. Underlying profits increased significantly driven by stable margins with a 89% COR (2022: 88%), combined with

higher revenues and investment returns. Other business highlights include the acquisition of the health business of Asefa

Seguros in June, which increased our health insurance portfolio by 37,000 customers. We also continued to expand digital

services and, in December, we reached an average of 68,000 video consultations per month (compared to an average of

64,000 per month in December 2022). We have made more than 814,000 video consultations this year, representing an

increase of 5.6%.

Our dental business in Spain saw increased revenue and underlying profit, driven by higher customer volumes. New

commercial agreements with Generali and Asefa contributed to good growth in the number of dental policyholders.

In our hospitals business in Spain, revenue and underlying profit reduced due to the impact of a historical CPI catch-up in 2022

on a long standing PPP hospital contract in Spain. During 2023, our own laboratory works reached full capacity with more than

750,000 samples taken this year.

In Sanitas Mayores, our aged care business in Spain, revenue and underlying profit improved through higher occupancy levels

and price increases. Closing occupancy rates increased to 96% (2022: 93%). We have announced plans to create capacity for

over 500 new beds over the next three years, opening five new residential centres in Madrid, Barcelona and Valencia, and

extending our existing centre in Barcelona.

In Bupa Chile, we returned to profitability, but the future outlook remains uncertain following cancellation of the GES price

increase (effective 1 January 2024) which had been a key driver of the return to a small profit in Isapre Cruz Blanca. However,

whilst the financial impact of adverse court rulings in relation to GES and RFT pricing remain unclear, more recent

developments suggest a pricing framework needed to support the sustainability of the industry is becoming more likely.

In Poland, LUX MED revenue increased and underlying profit was up as a result of strong customer growth in health provision.

In the year we also acquired a new hospital with leading multi-speciality capability. Through the period, we have maintained our

support for Ukrainian refugees who have been forced to flee the war.

In Türkiye, our health insurance business delivered substantial revenue growth, driven by pricing increases to keep pace with

higher rates of inflation. Profits increased in the period due to higher investment returns. The economy continues to be

classified as being a hyperinflationary environment, leading to the application of IAS 29. A net monetary loss of £18m has been

recorded outside of underlying profit for the period.

Care Plus in Brazil delivered strong revenue growth, with double-digit growth whilst customer numbers more than doubled.

Through the acquisition of Inpao Dental, Care Plus quadrupled its number of dental funding customers to 360,000; and through

the acquisition of Vacinar, an in-company provision provider focused on the corporate segment, Care Plus will now administer

over 400,000 vaccinations annually. Underlying profits reduced for the period driven by a provision release in the prior year for

onerous contracts.

Strategic Report

For the year ended 31 December 2023

7

Bupa Mexico delivered strong revenue and profit growth due to higher renewal rates in our insurance business alongside the

favourable rates boosting investment returns.

Bupa Global Latin America revenue increased due to higher volumes in the domestic health insurance market in Ecuador and

international products across the region. Underlying profits increased driven by higher revenue, investment returns and

improved margin. In the period, we started an alliance in Peru with Mapfre to jointly develop and offer new health products and

this will gradually expand to other countries in Latin America.

Bupa Global and UK

Revenue

Underlying profit

2023

£4,235m

£263m

2022 (AER)

£3,842m

£47m

% growth

10%

453%

2022 (CER)

£3,840m

£47m

% growth

10%

462%

Health insurance

customers (m)

Healthcare provision

customers (m)

Aged care residents

2023

3.4

3.7

6,400

(Commentary on a CER basis)

We achieved good revenue growth in our Bupa Global and UK Market Unit of 10% to £4,235m. Underlying profit grew by

£216m due to £117m of UK Dental tangible asset impairments in 2022, which was not repeated in 2023, and improved financial

performance across all Business Units.

In UK Insurance, underlying profit increased through higher investment returns and strong revenue and customer growth across

medical insurance, health trusts, dental insurance and cash plan in 2023. We launched several new propositions for customers,

including Workplace Mental Health Advantage, a new corporate proposition to support their people’s mental health through

early intervention, and Family+, a new consumer proposition built around savings for families.

In Bupa Global, our IPMI business, revenue and profit improved driven by increased customer volumes and strong corporate

revenue performance. Under the new regional commercial structure, we have made good progress against targets to deliver

long-term sustainable growth, with propositions tailored to meet local requirements. We launched new products in the UK, Africa

and the Nordics, and have also announced an expanded range of services and products in Egypt to provide holistic global

cover for individuals and their families.

The combined operating ratio (COR) for Bupa Insurance Limited, the UK based insurance entity that underwrites both domestic

and international insurance, was 95% (2022: 94%).

UK Dental losses reduced significantly following the early success of our turnaround strategy. This included the decision in

March to close, sell or merge 85 of our 475 dental practices in the UK as a result of the national shortage of dentists to deliver

NHS care, and heightened operational challenges due to macro-economic pressures, rising inflation and energy costs. We are

seeing rising numbers of clinicians choosing to work for us and improving retention rates amongst colleagues. We are seeing

strong demand for our quality services and we continue to improve our offering.

UK Care Services, our aged care business, delivered good growth in revenue and profit with occupancy reaching 90% in 2023

(2022: 87%), which is higher than pre-pandemic levels (2019 average: 87%). Underlying profit growth was driven by occupancy

growth, more self-funding residents and a material improvement in staffing levels which has reduced our reliance on agency

support. Our business continues to be impacted by high energy costs and salary inflation. Digital transformation progresses at

pace, with electronic care planning fully live in all our services and the rollout of electronic medication administration records.

Our retirement village portfolio has delivered strong performance driven by occupancy growth and property sales have

performed well against the backdrop of an uncertain housing market, demonstrating the appeal of our services, which we

continue to adapt in response to the needs of this evolving market.

Health Services delivered good growth in revenue and underlying losses reduced, driven by higher customer numbers and

strong growth across all product and service lines. We opened a further three new partnership clinics in the second half of the

year, launched remote GP services for UK Insurance customers, and the Cromwell Hospital opened a new urgent care and

acute admissions unit. Our Clinics and Cromwell Hospital treated increased volumes of UK Insurance customers as we

developed our Connected Care strategy to deliver more joined-up care for our customers. We also announced a major

expansion to our Cromwell Hospital site which, when completed, will provide additional outpatient capacity and improved

facilities for patients.

Strategic Report

For the year ended 31 December 2023

8

Other businesses

Revenue

Underlying profit

2023

£8m

£85m

2022 (AER)

£7m

£49m

% growth

22%

73%

2022 (CER)

£7m

£48m

% growth

25%

77%

Health insurance

customers (m)

Healthcare provision

customers (m)

2023

16.0

0.5

Performance

Underlying profit was up 77% to £85m driven mainly by higher volumes, margins and increased investment returns in Bupa

Arabia.

FINANCIAL REVIEW

Summary

15

FY 2023

FY 2022

restated (AER)

% growth/

(decline)

FY 2022

restated (CER)

% growth/

(decline)

Revenue

£15.1bn

£14.1bn

7%

£13.9bn

9%

Underlying profit

£747m

£748m

– %

£730m

2 %

Cash generated from operating

activities

£1,304m

£1,039m

26%

n/a

n/a

Statutory profit/(loss) before taxation

£717m

£(269)m

n/a

n/a

n/a

Leverage (excl. IFRS 16)

20.6 %

19.4 %

(1.2) ppts

n/a

n/a

Leverage (incl. IFRS 16)

27.9 %

27.3 %

(0.6) ppts

n/a

n/a

Solvency

175 %

181 %

(6) ppts

n/a

n/a

Revenue (CER)

Group revenue was up 9% as a result of customer growth in insurance, increased activity in health provision and higher

occupancy levels in aged care. This was partially offset by a significant increase in the cost of returning COVID-19 claims

savings to customers in Australia Health Insurance taking the total cost of the return in 2023 to £312m (2022: £240m)

16

. Pricing

changes contributed to revenue growth across all lines of business

17

as we seek to balance the impact of elevated inflation,

remaining competitive for customers and maintaining discipline in our underwriting of insurance risk across our markets.

Revenue in health insurance grew by 9% with customer growth of 8%

18

period-on-period across all of our market units. Our

health provision businesses saw revenue growth of 6% driven by higher levels of activity, particularly in our Polish business,

LUX MED, partially offset by a £41m one-off CPI linked performance catch-up on a long-standing PPP hospital contract in

Spain in 2022. In aged care, revenue was up 12% as occupancy rates increased by 4ppts, exceeding 2019 pre COVD-19

levels.

Underlying profit (CER)

Group underlying profit before tax increased 2% to £747m (2022: £730m) as strong customer growth and higher investment

returns were partially offset by lower profits in Australia Health Insurance, due to timing differences between the recognition of

COVID-19 claims savings and returns made to customers as part of our COVID-19 support programme introduced during the

pandemic. In 2023 the cost of returning claim savings (accumulated through the pandemic) to customers increased to £312m

(2022: £240m). In 2022 we also recognised £117m of tangible asset impairments in UK Dental, which was not repeated in

2023.

Strategic Report

For the year ended 31 December 2023

9

15

Prior period comparators have been restated to reflect the new accounting standard for insurance contracts, IFRS 17 and the updated definition of underlying profit. See

Note 1.5 and Note 2 for further detail.

16

Note variance to Full Year 2022 disclosures relates to change in accounting for premium rate deferrals under IFRS 17. Previously expensed as incurred but now

restated and recognised over the duration of the contract to which the deferral relates.

17

Lines of business represents, insurance, provision and aged care.

18

Excludes insurance customers from the associate businesses.

Health insurance underlying profit decreased as growth in revenues and investment returns across all Market Units were offset

by the timing differences between the recognition of COVID-19 claims savings and returns to customers in Australia Health

Insurance. Margins across our Europe and Latin America Market Unit improved, in part driven by the October 2022 GES

premium rate changes in the Isapre business which have been cancelled with effect from 1 January 2024. In Bupa Global and

UK, UK Insurance underlying profit increased through higher investment returns and strong revenue and customer growth. In

Bupa Global profits increased as we continue to see the positive effects of our portfolio management strategy improving the

performance of the business.

Profitability grew strongly in health provision due to margin improvement, customer growth and the absence of impairments.

Aged care returned to profitability in the period driven by higher levels of occupancy and an improved government funding

model in Australia.

Increased central investment into certain initiatives that increase our capability globally, including ESG, and higher interest rates

on variable rate debt, resulted in central costs increasing by £38m to £110m for the year.

Statutory profit

Statutory profit before taxation was £717m, up £986m AER (2022: £(269)m), driven by the higher underlying result and by the

movement in non-underlying items which totalled a £30m cost at FY 2023, compared with a £1,017m cost at FY 2022.

The key driver of the movement in non-underlying items was the near absence of impairments of intangible assets and goodwill

arising on business combinations of £1m (2022: £888m

19

). Our return-seeking asset portfolio delivered a positive return across

all asset classes, with strong performance in the final quarter of the year on lower yields and tightening of credit spreads. This

compares to mark-to-market losses that we saw across the portfolio in 2022 following general market volatility and inflationary

pressure which led to a significant increase in both interest rates and credit spreads in the period. We also reported a gain on

realised and unrealised foreign exchange in the period of £2m (2022: £15m loss).

Also included is a £21m (2022: £33m) net loss on property revaluations. In Bupa Villages and Aged Care Australia we

recognised a £32m (2022: £34m) amortisation charge on intangible assets following the government announcement to

deregulate bed licences from 2024. Losses in other non-underlying items of £8m (2022: £21m) primarily relate to restructuring

costs in Europe and Latin America and Bupa Global and UK. Partially offsetting this, Other businesses includes a £27m dilution

gain on the issue of share capital in Niva Bupa to external investors which took place ahead of us increasing our stake in the

business.

2023

£m

2022

restated

£m

Bupa Asia Pacific at CER

151

400

Europe and Latin America at CER

358

307

Bupa Global and UK at CER

263

47

Other businesses at CER

85

48

Central costs

(110)

(72)

Consolidated underlying profit before taxation at CER

747

730

Foreign exchange re-translation on 2022 results (CER/AER)

–

18

Consolidated underlying profit before taxation at AER

747

748

Impairment of intangible assets and goodwill arising on business combinations

(1)

(888)

Short-term fluctuation on investment returns

31

(22)

Net loss on disposal of businesses and transaction costs on business combinations

(1)

(4)

Net property revaluation losses

(21)

(33)

Realised and unrealised foreign exchange gains/(losses)

2

(15)

Amortisation of bed licences

(32)

(34)

Other non-underlying items

(8)

(21)

Total non-underlying items

(30)

(1,017)

Statutory profit/(loss) before taxation at AER

717

(269)

IFRS 17 Insurance Contracts

The IFRS 17 Insurance Contracts standard was issued in May 2017 as a replacement for IFRS 4 Insurance Contracts, with

effect for annual accounting periods beginning on or after 1 January 2023. In applying the new standard, the Group is applying

the simplified Premium Allocation Approach leading to revenue recognition that is consistent with that used under IFRS 4. The

Group’s net assets at transition on 1 January 2022 reduced by £56m. This is due to the derecognition of deferred acquisition

costs assets and the recognition of the loss component on onerous contracts, offset by the derecognition of both the COVID-19

Strategic Report

For the year ended 31 December 2023

10

19

Total £1bn of impairments in 2022, of which £117m were impairments to right-of-use and fixed assets in UK Dental which were included within underlying profit, with the

remaining £888m recognised in non-underlying items.

deferred claims liabilities and the premium deferral provision in our Australian insurance business, as these are not included

under IFRS 17.

The change to IFRS 17 results in a restatement of our reported Full Year 2022 underlying profit from £693m to £739m

20

AER.

This increase is mainly driven by the derecognition of the COVID-19 deferred claims liability and premium rate increase deferral

provisions. Beyond this, the impact of IFRS 17 is small, with other factors driving the restatement of profits including the change

from deferring acquisition costs to expensing up front and the recognition of losses on onerous contracts up front. See note 1.5

of the Annual Report and Accounts for further detail on the impacts of IFRS 17.

Insurance service result

Following the transition to IFRS 17 we are required to report an insurance service result which comprises: insurance revenue,

less insurance service expenses. This result excludes financial income and expenses. The 2023 the Group insurance service

result was £445m (2022: £672m) with higher revenues being offset by the lower profits in Australia Health Insurance, due to

timing differences between the recognition of COVID-19 claims savings and the returns made to customers. The 2023

combined operating ratio (COR)

21

was 96% (2022: 93%).

Taxation

The Group’s taxation expense for the year was £177m which represents an effective tax rate of 25% (2022: (48)%) in line with

the UK statutory corporation tax rate. The 2022 effective tax rate of (48)% was mainly driven by the net tax impact of one-off

goodwill and fixed assets impairments for which no tax deductions can be claimed.

Cash flow

Net cash generated from operating activities increased by £265m year-on-year to £1,304m driven by higher revenue across the

market units partially offset by the reduction in Australia Health Insurance profits. Net cash flow used in investing activities

reduced by £731m to £142m as less of the cash generated from operating activities has been invested into financial assets

versus 2022 contributing to the higher cash and cash equivalent balances being held at the year end. Cash used in financing

activities has reduced in the period by £345m to £203m, primarily due to the issuance of €500m of senior unsecured bonds.

This was partially offset by the repayment of £250m of Tier 2 bonds.

Funding

We manage our funding prudently to ensure a strong platform for continued growth. Bupa’s policy is to maintain investment

grade access to both the senior and subordinated bond markets. Fitch and Moody’s reviewed Bupa’s credit ratings during 2023,

with no rating changes in 2023.

We continue to hold a good level of Group liquidity. At 31 December 2023, our £900m revolving credit facility was undrawn

(2022: £70m drawn). In November, the final one year extension on the facility was exercised, with it now maturing in December

2028. We used the facility in the first half of the year to repay a subordinated bond on its scheduled maturity date and this was

repaid in October following the issuance of a €500m senior bond. 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 2023 was 20.6% (2022: 19.4%) and was 27.9% (2022: 27.3%) when IFRS 16 lease liabilities are included.

Chile - Isapre Cruz Blanca contingent liabilities

The negative impact of judicial and regulatory action on the Isapre insurance industry in Chile continues as the method and

implementation of the statutory Risk Factor Tables (used to adjust the price of insurance contracts based on risk factors such as

age) following a Supreme Court decision of December 2022 remain unclear.

To date, several proposals have been put forward in an attempt to make the industry sustainable and attractive enough to

secure the required political support. The Technical Commission report published in October and revised draft law published in

November were both significantly more favourable than the initial draft law published in May 2023, but still led to differing

quantifications of the retrospective liabilities. The method, form and timing of settling any such liabilities also remains unclear

with the Technical Commission report proposing that these liabilities are funded over a period of 10 years in healthcare benefits,

rather than cash. These proposals were largely adopted into the revised draft law which has moved from the Senate to the

Congress, although the exact details of how this would operate are currently unclear. The draft law is progressing through the

Strategic Report

For the year ended 31 December 2023

11

20

FY 2022 reported underlying profit of £748m also includes £9m impact from the change to the underlying profit definition, our non-GAAP measure of trading profit. Other

and FX balances net to nil.

21

COR is calculated based on “Insurance service expense” plus “Net expense from reinsurance contracts held” divided by “Insurance revenue” as shown in the

Consolidated Income Statement.

legislative process, including approval by the Senate in January 2024, but is still subject to debate in Congress, the lower house

of the Chilean parliament.

Whilst the government remains committed to enacting legislation by the May 2024 deadline, there remains considerable scope

for the proposals to be amended or rejected. Given the range of uncertainty around the outcome, no IFRS provision has been

recognised as at 31 December 2023.

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. As at 31 December 2023, the Group included an

allowance of £165m (HY23: £160m and FY22: £100m). As previously stated, the final impact is likely to differ materially from

this value and this is a calculation for Solvency II purposes and not a pre-estimate of all actual or potential losses relating to

Isapre Cruz Blanca. Any retrospective payments finally determined to be due in respect of historic policies as a result of the

Risk Factor Table ruling and subsequent legislation would be liabilities for Isapre Cruz Blanca.

In addition to the Risk Factor Table ruling, the Chilean Supreme Court decision in August 2023 led to the most recent regulator-

approved GES price increase being cancelled, effective from 1 January 2024. This had been a key driver of Isapre Cruz Blanca

returning to a small profit for Full Year 2023. In December 2023, the regulator communicated the basis for calculating the

retrospective payment element in relation to the GES rate increase. This has been provided for and given the low probability of

further exposure, no further contingent liability disclosed.

Solvency

22

The Group's solvency coverage ratio of 175%

23

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 2023, the estimated SCR of £2.9bn was

£0.2bn higher and Own Funds of £5.0bn was £0.1bn higher when compared to 31 December 2022.

The Group's surplus capital was estimated to be £2.1bn, compared to £2.2bn at 31 December 2022, representing a solvency

coverage ratio of 175% (FY 2022: 181%). Our business continued to generate capital through our underlying profitability. This

capital generation was offset by the £250m repayment of Tier 2 subordinated debt, capital expenditure, debt financing costs and

increased regulatory provisions in relation to Isapre Cruz Blanca in Chile.

On 8 January 2024, the Group acquired additional shares in Indian health insurer Niva Bupa Health Insurance Company

Limited resulting in a controlling shareholding. The impact of this acquisition is an estimated 8 percentage point reduction to the

Group solvency coverage ratio.

The Group 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 10 percentage point

reduction to the solvency coverage ratio.

The Bupa Group's capital position is resilient in the face of the individual risks, illustrating the strength of our balance sheet.

Risk Sensitivities

Solvency II coverage

ratio

Solvency coverage ratio

175 %

Property values -10%

165 %

Loss ratio worsening by 2%

168 %

Sterling depreciates by 20%

169 %

Group Specific Parameter (GSP) +0.2%

24

173 %

Interest rate -100bps

173 %

Credit spreads +100bps (no credit transition)

175 %

Pension risk +10%

175 %

Equity markets -20%

175 %

The Group includes a Group Specific Parameter ('GSP') in respect of the insurance risk parameter in the Standard Formula.

Applying a premium recognition adjustment to the GSP loss ratio data to allow for the distorting impact of the COVID-19

pandemic.

Strategic Report

For the year ended 31 December 2023

12

22

23

24

Section 172 and engagement statement

The following provides the Directors’ statements, required by the Companies Act 2006 (the 'Act'), to report on how they have

performed their duties in relation to Section 172(1) of the Act and engaged with employees, suppliers, customers, and others. It

draws upon information contained earlier in the Strategic Report, which has been signposted and not repeated.

Section 172 Statement

This statement sets out how the Board has acted in a way that promotes the Company's long-term success and sustainability

for the primary benefit of its sole shareholder, The British United Provident Association Limited, to support the Parent's purpose

of helping people live longer, healthier, happier lives and making a better world, as well as its other key stakeholders.

When making decisions, the Board is guided by Section 172 of the Act when performing its duties and making decisions

regarding the likely long-term impact, interests, concerns of its key stakeholders and on the communities in which Bupa

operates, its environment and maintaining high standards of business conduct.

Engaging with our key stakeholders

As an intermediate holding company for the Group, how the Company engages with its key stakeholder groups is in the context

of business oversight and is consistent with reporting by our Parent in its Annual Report and Accounts in respect of 2023.

During the year, the Board has considered the Group’s Parent, customers, people, bondholders, suppliers and partners,

regulators, and communities and the environment, as its key stakeholder groups, and had regard for their views and interests

when making decisions and overseeing execution of Bupa’s business model and strategy.

Customers

With a Group ambition to be the world’s most customer-centric healthcare company, Bupa’s customers are the focal point of all

Bupa Board decisions. The Board has had regard to customers' experience and future expectations via the Customer Listening

app in 2023 and in reports to the Board.

People

Bupa’s people are central to supporting customers, living our values and the long-term success and sustainability of the

Company and Bupa. It is fundamental that we listen to our people and consider their interests to ensure we attract and retain

the best people and they feel Bupa is a great place to work. Reporting on people strategy and governance is made to, and

overseen by, the Bupa Board, including its talent management, people development, biannual People Pulse employee surveys

and the operation and reporting in respect of ‘Speak Up’, the confidential whistleblowing helpline.

Bondholders

As outlined earlier, the Company has a series of publicly-traded debt securities in issue on the London Stock Exchange and is

therefore subject to the relevant UK Listing Rules and the Disclosure Guidance and Transparency Rules, and the UK Market

Abuse Regulation, and matters relating to the issue and trading of its debt securities are regulated by the Financial Conduct

Authority (FCA). Investors in these debt securities are interested in the Company and Bupa’s financial performance and

strength, and increasingly Bupa’s sustainability and wider ESG activities. On behalf of the Company and its Parent, Directors

hold briefing calls for bondholders to discuss the full year and half year results, strategy, and its sustainability and ESG

activities. This provides an opportunity for them to question management on the financial performance and strategy of the

Company and Bupa. The Directors also held roadshows for current and prospective bondholders during the year, and

communicated other significant developments via regulatory announcements and press releases, which are also published on

our website, bupa.com.

Regulators

The Group operates in highly-regulated environments across the health insurance, provision, and aged care businesses. Our

insurance business is also subject to financial services regulatory regimes and our aged care business with care quality

regulators. In some cases, regulators are independent of governments, and in other situations Bupa’s activities are directly

regulated by national or local governments. The relationship with regulators is performed by our Parent, on behalf of the

Company and its Directors, as that is where the Group oversight responsibilities for Bupa sit under the Senior Managers and

Certification Regime in the UK.

Suppliers and partners

Bupa’s suppliers and partners support our business needs and help Bupa to deliver a high-quality service to customers, so it is

important that we have strong working relationships and operate ethically. The Board has regard to Bupa’s Responsible Supply

Chain Statement, available at bupa.com, that sets Group expectations of our suppliers and our commitments to them, alongside

Group policies set and approved by the Bupa Board. The Board also considers matters related to modern slavery and the

supply chain and approved the Modern Slavery Statement, which can be found on bupa.com.

Strategic Report

For the year ended 31 December 2023

13

Communities and the environment

Bupa operates within a societal context and believes the health of the community and environment we live in has a significant

impact on people living longer, healthier, happier lives. The Company’s Parent reports on sustainability and ESG actions,

engagement, and ambitions on behalf of the Group and provides Bupa’s statements on climate related financial disclosures

now under the Act, on page 34 of its Annual Report and Accounts 2023.

Strategic decisions and their impact on stakeholders

The table below sets out examples of decisions the Directors have taken during the year and how stakeholder views were taken

into account.

Bond Issuance – Bondholders, customers, regulators

The Board is responsible for promoting the

Company’s long-term sustainable success and

ensuring that the necessary resources are in place

to meet its objectives. Maintaining a strong capital

base and access to liquidity means the Group has

the resources to be able to maintain and improve

its offer to customers and fund future growth of the

business.

Action

On 12 October 2023, the Company issued €500m of 5.00% fixed rate

notes with a maturity date of 12 October 2030, following Board approval.

Stakeholder considerations

Management discussed the proposals with the regulator to ensure they

were comfortable with the proposal ahead of the issuance. Management

also consulted the Company’s rating agencies.

Long-term impact

Directors were satisfied the bond issuance demonstrated to bondholders,

customers, and regulators that the Group would continue to hold

sufficient capital reserves and could comply with relevant capital

adequacy regulations. The issuance enabled the Company to enhance

its strong liquidity and capital positions, improve our offer to our

customers and generate sustainable long-term growth. The issuance

was denominated in Euros which enabled the Company to access a

wider investor base.

Acquisition of Majority Shareholding in Niva Bupa – Customers, people, regulators, bondholders, communities

The Board monitors the Company’s funding and

liquidity position to ensure that it has sufficient

headroom in the level of liquidity we hold above

risk appetite. The Board manages the need to

maintain the financial strength of the Company with

the funding requirements of the business to invest

in growth opportunities and to achieve the Group’s

objectives.

Action

During the year, the opportunity arose to increase Bupa’s minority

shareholding in its associate business in India, Niva Bupa, to a

controlling interest. In order to carry out the acquisition, the Board

approved the funding of the acquisition through a capital injection into its

direct subsidiary, Bupa Investments Overseas Limited, for onward

funding of the transaction. The acquisition completed on 8 January 2024.

Stakeholder considerations

The Board considered Niva Bupa’s profitable outlook and robust growth

projections and the benefits for customers, people, and the community in

India. Additionally, the Board closely monitored the Company’s liquidity

and capital resources before concluding on balance, that the acquisition

was in the best interests of the Company and the Group’s long-term

growth objectives.

Long-term impact

The acquisition of a majority shareholding in Niva Bupa provides the

Company with an opportunity for long-term expected returns on the

additional investment, with Niva Bupa having the potential to play a key

role in driving Bupa’s growth and profitability in the medium to longer-

term. It also provides the opportunity to reach and serve more customers

in India.

Strategic Report

For the year ended 31 December 2023

14

Risk

Embedding a strong risk management culture is a priority across Bupa supported by robust risk management and

controls.

Our 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 internal 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 is important to

everyone at Bupa and they are equipped to manage risk. Bupa 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.

Bupa continue 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, operational and economic

risks. Our health insurance, provision and aged care activities also carry different risk profiles including clinical risk.

It makes

sure Bupa 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.

Bupa manages its risks using a 3 lines model as set out in the risk management framework approved by the Parent Board. It

determines Bupa Group's risk appetite determined by setting the degree of risk the Group is prepared to accept in order to do

business and deliver the Bupa Group's strategy.

The core risk appetite statements focus on:

◦

The treatment of customers and employees

◦

Management of our financial strength and

◦

Operational risk, including information security; privacy and clinical risks.

The risk appetite statements are reviewed annually by management, then the Parent Board's Risk Committee, and are

approved by the Parent Board in respect of the Bupa Group.

Risk profile

Risk is an inevitable part of operating a business. Some risks are avoidable while others are inherent in our business model so

we have an effective internal control and risk management system to mitigate these risks.

The Parent ensures that significant economic capital is maintained at the Bupa Group level 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.

◦

Property Risk

- 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.

◦

Insurance Risk

- 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.

◦

Currency Risk

- 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.

◦

Operational 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).

◦

Credit spread and counterparty default Risk

- 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

.

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.

Strategic Report

For the year ended 31 December 2023

15

Risk

Comment and outlook

Mitigating actions

Information security

The risk of significant

financial and reputational

impacts due to a failure to

appropriately secure

information (including

personal information).

Information security remains a critical challenge

for all businesses, particularly those in the

healthcare sector.

The threats to our businesses evolve constantly

and therefore our responses need to continue

to do so as well.

This risk will remain elevated given the

challenging macroeconomic and geopolitical

environment and several incidents targeting the

healthcare sector.

We are continuing to invest in a range of

activities and actions to enhance security as we

further digitalise customer experience

All staff are required to complete appropriate

mandatory training.

We have well-established and tested data

breach incident response plans in place across

the Group.

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 held locally in our

insurance businesses.

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.

Our stress-testing programme considers the

liquidity impacts of potential adverse scenarios

Government, legal and

regulatory change risk

The risk of failure to

anticipate or influence

changes in the

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.

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.

Transformation

execution risk

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

strategy

is

focused

on

addressing

customer expectations as they change.

All Market Units have a range of transformation

activities under way.

Transformation and strategy execution are a

key focus of senior management and the BERC

consider risks to the strategy as a standing

agenda item.

We have extensive governance mechanisms in

place with regards to acquisitions, including

conducting

post-acquisition

reviews

and

implementing learnings into future acquisitions.

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.

Strategic Report

For the year ended 31 December 2023

16

Operational resilience

The risks associated with

failure to ensure our

businesses remain

resilient to operational and

supply chain challenges

including those presented

by third-party suppliers.

This includes the risks

associated with complying

with the associated

regulatory requirements.

Operational resilience capabilities are key to

being able to maintain operations in the face of

many challenges including third-party and

supply

chain

risks,

workforce

fatigue,

information security and other operational risks

and the challenges presented by business

growth.

As we grow, these challenges will continue to

become more pronounced, particularly where

we increase our reliance on third parties

We continue to focus on heightening our

supplier

monitoring,

management

and

communications

to

help

minimise

future

disruption.

Our businesses have well-established and

tested disaster recovery plans.

Technology innovation

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/ behaviours

with

higher

expectations

for

technological

solutions, including those utilising AI, to improve

interactions and the need for businesses to

ensure

appropriate

IT

capabilities

and

operational resilience to deliver for customers.

Customers are increasingly looking towards

digital and remote healthcare options and this

trend is likely to continue to accelerate.

We continue to focus on significantly increasing

our digital offerings in line with the Group

strategy.

We are enhancing our back-office processes

where

possible

to

leverage

emerging

technologies.

Geopolitical uncertainty

The risks associated with

geopolitical uncertainty

and increasing

nationalistic policies

across our businesses

and globally.

This has been an emerging and increasing

trend for some time and likely to continue for

the foreseeable future.

We continue to focus on heightening our

supplier

monitoring,

management

and

communications to help minimise disruption.

Economic conditions

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. In many markets we are

seeing heightened inflationary pressures and

increased interest rates. This is challenging

both consumer and government spending.

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.

Management of the financial and performance

risks as a result of the challenging economic

conditions is a key focus of management

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. 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.

Reputational contagion risk remains prominent

in

our

operational

and

reputational

risk

management agenda with a focus on resolving

and learning from issues faced.

With the continuing implementation of our new

sustainability strategy we have increased our

focus on management of sustainability and

ESG risks.

The implications of failures to manage our

reputation has been one of the key focus areas

of our stress-testing programme this year

Strategic workforce

risks

Risks associated with the

resilience of our own

people

which may impact

their ability to deliver for

the customer. This also

includes strategic risks

associated with workforce

availability.

In many markets we continue to see strategic

challenges

associated

with

workforce

availability,

particularly

clinical

workforce,

exacerbated by cost-of-living challenges, which

may impact our ability to deliver services.

Workforce availability remains a key area of

focus for senior management with a range of

activities under way in each market to address

challenges.

Strategic Report

For the year ended 31 December 2023

17

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.

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.

On behalf of the Board

James Lenton

Director

6 March 2024

Strategic Report

For the year ended 31 December 2023

18

Corporate Governance Report

Corporate Governance statement

The Company meets the thresholds of the Act to apply a corporate governance code and is therefore required to report on its

corporate governance arrangements. While the Company is a holding company for Bupa subsidiaries, some of which are

regulated under financial services regimes, and has listed debt securities on the London Stock Exchange, it is also a wholly

owned subsidiary of The British United Provident Association Limited (Parent) and is included in their consolidated Group

accounts and reporting. Its Parent has the ultimate oversight role for the Group from a governance perspective, in accordance

with the Senior Managers and Certification Regime.

The Company's Parent has chosen to apply the FRC’s UK Corporate Governance Code 2018 (the Code) to the extent it is

appropriate and relevant to a company limited by guarantee, without shareholders. As a subsidiary, the Company therefore acts

in line with the corporate governance arrangements set and operated by its Parent, including Bupa Group's policies and

procedures. How the Company's Parent has chosen to apply the Code in accordance with the comply or explain requirements,

is set out in the Governance section of its 2023 Annual Report and Accounts which can be found on its website

(www.bupa.com/about-us/governance), .

Bupa's Governance Structure

Bupa’s governance structure is set by its Parent's Board and supports its systems of controls and risk management for the

Group to ensure the Bupa Group is operated and is managed in the most effective and responsible way in accordance with our

purpose and corporate values.

Audit, risk, and internal control

Bupa has a Risk Management Framework which follows the ‘three lines’ approach to risk that is common in financial service

organisations. It is intended to ensure appropriate governance is in place, risk appetite is set for key areas of business and risk,

effective controls are in place to either eliminate or mitigate risk, controls, are documented, and that there is adequate data

capture and reporting to monitor the risks, risk management and controls and their effectiveness throughout the Group. Detail

on Company's key risks, risk profile and how the risks are mitigated and managed is set out earlier in the Risk section of the

Strategic Report on pages 15 to 18.

Under its governance, and in accordance with the Code, the Company's Parent Board has delegated the oversight and

monitoring of the systems of internal control and risk management to its Board Audit and Risk Committees, respectively. The

Parent Board's Audit Committee has also been given specific delegated authority to monitor the integrity of the financial

statements of the Company, including its annual and half-yearly reports, preliminary announcements, and any other formal

announcement relating to their financial performance; and to review and report to the Parent and Company's Boards on

significant financial reporting issues and the judgements that those statements contain, having regard to matters communicated

by the External Auditor, PwC. The Parent Board's Audit Committee performs the functions in DTR 7.1.3 and DTR 7.2.5 in

respect of the Company and details of its members can be found on www.bupa.com/about-us/governance and the Board of

Directors pages in the Parent's 2023 Annual Report and Accounts.

Three Lines Model

First-line accountability

All of Bupa's people have first-line accountability to have awareness of the risks relevant to their role and work, and to manage

them in accordance with our policies, the Bupa Code and relevant laws and regulations. This keeps the Group safe, including

Bupa's customers. The programme to develop a Group-wide Integrated Management System (IMS) to map and document

Bupa’s risks and processes continued in 2023 and is designed to enhance first-line accountability. All Bupa’s people also

receive mandatory training on key topics and role-specific training to ensure they have appropriate knowledge and awareness.

Second-line assurance - Risk and clinical governance

The second-line is performed by the Group Risk function, led by the Group Chief Risk Officer (Group CRO). The function

operates across the Group and each Market Unit has its own chief risk officer. The Group Risk function monitors risks and the

application of the Risk Management Framework, operation of controls,adherence to the risk appetites in the first-line and clinical

governance, and reports to an executive forum, the Bupa Executive Risk Committee (BERC), comprised of direct executive

reports to the Group's Chief Executive Officer (Group CEO). The BERC supports the Group CRO to perform his SMCR Group

oversight role of Bupa’s UK regulated subsidiaries. The function provides reports to the Parent Board's Risk Committee to

support its independent monitoring and oversight of risk management and its effectiveness on behalf of the Parent's Board,

including a second-line view on the effectiveness of internal controls and the management of risks within appetite.

Governance

For the year ended 31 December 2023

19

Third-line assurance - Internal Audit

The third line is the Group Internal Audit function which operates as a global function and undertakes independent assurance

on behalf of the Parent's Board and its Audit Committee. The function is headed by the Group Chief Audit Officer (Group CAO),

who is appointed by the Parent's Audit Committee. Group Internal Audit operates in line with the global Institute of Internal

Auditors’ (IIA) International Standards and UK Financial Services Code, and other applicable legal and regulatory requirements.

Its role, authority and independence are set out in the Internal Audit Charter, which is reviewed and approved annually by the

Parent Board's Audit Committee. Each year Group Internal Audit develops a risk-based assurance plan, taking account of the

Group’s key risks, business plans, regulatory requirements, and other relevant information. The plan is reviewed and approved

by the Parent's Audit Committee and relevant subsidiary audit committees and updated periodically as required. The internal

audits are globally coordinated and/or typically performed by Market Unit or Business Unit internal audit teams, who are

supported by global operations and analytics teams. Internal audits typically provide an assessment of the effectiveness of risk

management and internal control, including evaluation and testing of the design and effectiveness of key governance,

management, and operational controls as appropriate. Group Internal Audit reports findings from its work to management and

agrees actions to address weaknesses or make improvements, which are management’s responsibility to implement. The

Parent Board's Audit Committee, and subsidiary audit and risk committees, receive summary reports from the Group or Market

Unit Chief Audit Officer on all of Group Internal Audit’s work, including summary observations relating to the effectiveness of the

Group’s risk management and internal control framework.

Oversight and annual review of the Group CAO and Group Internal Audit function’s performance is performed by the Parent's

Audit Committee, with an external quality assessment undertaken every five years in accordance with IIA International

Standards. The next external quality assessment is due in 2027.

External Auditor

The Company has appointed PricewaterhouseCoopers LLP (PwC) as its External Auditor, to provide independent external

assurance on the audited financial information in Bupa’s Annual Report Accounts, as well as other reviews and limited

assurance activities. The process for the tender and selection of an External Auditor, and their appointment and reappointment,

is run by the Parent Board's Audit Committee, which also reviews and approves the scope, terms, and fee for the External

Auditor’s work on behalf of Bupa's Group, and ensures PwC have the requisite internal procedures and controls, and resources,

to perform effectively, independently, objectively and in accordance with the FRC’s Revised Ethical Standard 2019. Following its

reviews the Parent Board Audit Committee recommended the reappointment of PwC, which the Company approved and will

propose to its shareholder at its Annual General Meeting. From time to time it may be appropriate for the Company to request

PwC undertake work outside of the scope of the external audit. In order to ensure that that PwC’s objectivity and independence

is preserved the Bupa Group has a Non-Audit Services Policy, that the Company adopts, which sets out the circumstances

under which PwC can be engaged for non-audit services, employment restrictions and the applicable controls. Details of non-

audit services and fees during 2023, and fees paid to PwC, are set out in the Notes to the Accounts on page 59.

Whistleblowing

Bupa's culture and values encourage its 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. Regular internal campaigns are run 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. Bupa uses its biannual People Pulse engagement survey to test the level of

confidence people have in Speak Up, and invites feedback. The Parent Board's Audit Committee annually reviews the Group's

Speak Up Policy to ensure that it is robust and operating effectively and recommends it to the Parent Board for approval, and it

receives regular updates on issues reported through Speak Up during the year and on investigations and actions taken.

Report of the Directors

Disclosure compliance

The Strategic Report and the audited financial statements are presented on pages 3 to 18 and from page 36, respectively. The

Governance report on pages 19 to 23 comprises the Directors’ report.

The following disclosures required to be contained in the Directors’ report under the Companies Act 2006 (the Act) 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:

Governance

For the year ended 31 December 2023

20

Disclosure

Location

Financial instruments

Notes 10 & 11, pages 77-80

Risk management objectives and policies

Note 25, page 98-110

Assessment or principal and emerging risks

Risk, pages 15-18

Likely future business developments

Strategic Report, pages 3-18

Acquisitions and disposals

Note 23,

pages 95-97

Financial performance

Pages 9-12

Post balance sheet event

Note 1.8, page 49

Relationships with suppliers, customers, and others

Section 172 statement, pages 12-14

Engagement with employees

Strategic Report, page 13

Insurance and indemnities

The Group 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 2023 and to the date of this Annual

Report. There are no other qualifying third-party indemnity provisions or pension indemnity provisions in place.

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 on page 44 includes information on the Directors’ detailed

assessment of the Group’s status as a going concern.

Longer-term viability

The 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.

Bupa’s 3x6 Strategy introduced in 2021 is the driving force behind the transformation agenda and planning process. A three-

year assessment period was chosen for the longer-term viability assessment because it ties in with our internal planning

process. Bupa’s 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 affect Bupa as a whole.

As part of the assessment of viability, the Directors looked at the 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 £300m senior bond

maturing in 2024 is repaid from available liquidity.

A number of reasonably plausible severe scenarios were considered as well as contingent liabilities. Our most severe

reasonably possible scenarios considered adverse outcomes from the Chile Supreme Court decision described on page 111,

combined with economic stresses and other factors. The outcomes considered in relation to Chile were materially worse

outcomes than the Solvency II capital allocated against the contingency given the inherent uncertainty surrounding the

implementation of the Chile Supreme Court decision. A variety of local scenarios developed by each Business Unit were

separately considered with the majority focusing on governmental, legal and regulatory risk and risks from climate change.

Under the most severe scenarios considered, the forecast liquidity position reduces and management actions would be

required to remain within the Group’s liquidity appetite over the three-year planning period. Management actions include

reducing expenditure, obtaining additional funding or divesting investments or businesses.

‘Reverse stress testing’ is also conducted at the Group level, aimed at identifying hypothetical circumstances that might result in

our business model failing and helps the 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 would need to occur in order to

induce failure (prior to the taking of management actions) in the timeframe considered.

The most recent ORSA, that 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 that are aligned to our risk profile.

It also sets out the management actions, identified as part of the Group’s Recovery Plan, that are available to address

challenges to the Group’s liquidity or solvency position. This assessment concluded that we expect to have sufficient capital

assets to continue to meet regulatory requirements over a three-year period.

Governance

For the year ended 31 December 2023

21

Although Bupa pays interest on its borrowings, it has no shareholders and therefore does not pay dividends. Instead, Bupa 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 Risk on pages 15 to 18, the Directors are satisfied that there are

appropriate risk management and governance procedures in place to manage and mitigate these risks over the three-year

period. Emerging risks are identified and reported on to ensure that they are properly understood and are considered in future

strategic decisions.

While continuing uncertainty exists as a result of the challenging macroeconomic and geopolitical environment, the Group’s

diversified business model continues to support the viability of the Group over the period considered.

Based on this analysis and 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 2026.

Dividends

The Company paid interim dividends of £134 million (2022: £89 million) during the year. No final dividend is proposed.

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.

Each of the current Directors, whose names and positions are set out on page 2, confirm that to the best of their knowledge:

•

The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair

view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the

consolidation taken as a whole.

•

The Strategic Report includes a fair review of the development and performance of the business and the position of

the Company and the undertakings included in the consolidation taken as a whole, together with a description of the

principal risks and uncertainties that they face.

Governance

For the year ended 31 December 2023

22

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, PwC, 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 PwC is aware of that information.

External Auditor reappointment

A resolution to re-appoint PwC as the Company's External Auditor will be put to the Company's forthcoming AGM.

On behalf of the Board

James Lenton

Director

6 March 2024

Company number: 2779134

Governance

For the year ended 31 December 2023

23

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 2023 and of the

Group’s profit 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: Consolidated and Company Statement of Financial Position as at 31 December 2023; Consolidated Income

Statement, Consolidated Statement of Comprehensive Income, Consolidated Statement of Cash Flows and Consolidated and

Company Statement of Changes in Equity for the year then ended; and the notes to the financial statements, comprising

material accounting policy information and other explanatory information.

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 2.3.2, 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 and we continue to utilise virtual technologies and collaborative workflow tools to obtain sufficient, appropriate

audit evidence whilst working in a hybrid environment. On a rotational basis, we meet 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

24

Overview

Audit scope

•

The Group has four reportable segments, in addition to the Group Functions activities. Each reportable segment

includes a number of reporting components across different locations and service lines.

•

We conducted audit testing over 29 components. These were selected based on our assessment of inherent risk and

their financial significance to the consolidated financial results.

•

8 components were subject to an audit of their complete financial information.

•

Specific audit procedures were performed on certain balances and transactions for a further 21 components.

•

Our audit scope provided coverage of 85% of IFRS profit before taxation expense.

Key audit matters

•

Implementation of IFRS 17 (Group)

•

Valuation of the estimate of the present value of future cash flows within the liability for incurred claims (Insurance

contract liabilities) (Group)

•

Valuation of freehold property and investment property (Group)

•

Impairment of goodwill or reversal of previous impairments to other intangible and tangible assets (Group)

•

Classification, recognition and disclosure of certain liabilities relating to Isapre Cruz Blanca (Bupa Chile) under IAS 37

Provisions, Contingent Liabilities and Contingent Assets (Group)

•

Recoverability of Company’s investment in subsidiaries (Company)

Materiality

•

Overall Group materiality: £48.0 million (FY22: £30.8 million) based on 5% of Profit before taxation expense adjusted

for certain non-recurring items.

•

Overall Company materiality: £26.4 million (FY22: £14.1 million) based on 1% of Net assets.

•

Performance materiality: £36.0 million (FY22: £23.1 million) (Group) and £19.7 million (FY22: £10.6 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.

Implementation of IFRS 17 and Valuation of the present value of future cash flows within the liability for incurred claims are new

key audit matters this year. Valuation of provisions arising from insurance contracts, Valuation of equity impact from the

transition to IFRS 17 and Application of IAS 29 - financial reporting in hyperinflationary economies, which were key audit

matters last year, are no longer included because of the update in the application of hyperinflationary accounting for Türkiye

now embedded in the group's business as usual processes. Otherwise, the key audit matters below are consistent with last

year.

Independent auditors’ report to the members of Bupa Finance plc (continued)

25

Key audit matter

How our audit addressed the key audit matter

Implementation of IFRS 17 (Group)

Refer to Note 1.5 (for accounting policy and financial

disclosures)

The Group adopted IFRS 17 for insurance contracts as at 1 January

2023. This has led to changes in the valuation of insurance contract

liabilities, recognition of insurance revenue and expenses, and the

presentation of the financial statements. We have determined the

implementation of IFRS 17 to be a key audit matter in the current

year due to the significance of the changes brought about by the

new Standard.

The Group has applied the premium allocation approach (“PAA”) to

most of its insurance contracts given their short tailed nature.

Key areas of focus were:

Unit of account and contract boundaries

The determination of the 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, judgement is required to

determine

whether there would be a 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.

Loss component

The consideration of units of account drive the onerous contract

assessments at a more granular level than previously 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.

Allocation of expenses to insurance contracts

Insurance

service

expenses

include

claims

and

non-claims

expenses. Non-claims expenses are required to be split between

attributable

and

non-attributable

expenses

which

requires

judgement.

The work to address the implementation of IFRS 17 included the

following procedures that we performed:

•

Assessed and tested the design and implementation of

controls around the first-time adoption of IFRS 17;

•

Considered the application of accounting policies for in-

scope components to assess whether the policies were

applied consistently across the Group;

•

Assessed the appropriateness of key judgements used to

determine accounting policies and that the chosen

accounting policies are in-line with the requirements of the

Standard. This included the judgements in relation to the

determination of the unit of account and contract

boundaries;

•

Evaluated the appropriateness of management’s PAA

eligibility analysis and conclusions, including testing the

completeness and accuracy of supporting data, evaluating

reasonably expected scenarios and testing the accuracy

of the models;

•

Evaluated the appropriateness of methodologies and

assumptions used in determining loss components

recognised, and tested the accuracy of the loss

component calculation through reperformance; and

•

Tested the appropriateness of the split of non-claims

expenses between attributable and non-attributable.

Based on the procedures performed, we consider the requirements of

IFRS 17 have been implemented appropriately, including the use of

appropriate accounting policies, and that judgements applied are

appropriate.

Independent auditors’ report to the members of Bupa Finance plc (continued)

26

Valuation of the estimate of the present value of future cash

flows within the liability for incurred claims (Insurance contract

liabilities) (Group)

Refer to Note 12 (for accounting policy and financial disclosures)

Insurance contract liabilities comprise the liability for remaining

coverage (LFRC) and the liability for incurred claims (LFIC), which

comprises the estimate of the present value of future cash flows and

the risk adjustment.

We have determined the estimate of the present

value of future cash flows to be an area of focus given its magnitude

and the judgement required in estimating the cash flows, in particular

for incurred claims.

Estimate of the present value of future cash flows within the

liability for incurred claims

£1,313m (2022: £1,176m)

The estimate of the present value of future cash flows is based on

certain key assumptions relating to the frequency, severity and

settlement patterns of insurance claims.

Established

actuarial

techniques

including

the

chain

ladder,

Bornhuetter-Ferguson and pure risk cost methods are used to

produce a best estimate of the present value of future cash flows.

Consideration is made for the claims inflation assumptions and

expected trends in medical costs and treatments.

The frequency and severity of health insurance claims are generally

highly predictable with claims settled within a few months of a

medical event that has led to a claim.

Given the short-tailed nature of the insurance, the key source of

estimation uncertainty is in relation to estimating the incurred claims

for the most recent months before 31 December 2023.

The work performed to address the valuation of the estimate of future

cash flows for insurance contracts included the following procedures:

•

Understood and evaluated the processes and controls in

place to determine the estimate of future cash flows;

•

Tested the design and implementation of controls in place

over the estimate of future cash flows, including those

covering

the

approval

of

assumptions,

and

the

completeness and accuracy of data used;

•

Using our actuarial specialist team members, 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 estimate

of future cash flows for reasonableness compared to

historic experience, including the impact of inflation;

◦

Performed independent estimate calculations for 53%

of the estimate of future cash flows, comparing our

estimates to those booked by management, and

investigated differences, where material;

◦

Evaluated the methodology and assumptions applied

by management for a further 29% of the estimate of

future

cash

flows,

including

reperforming

management’s

calculations

and

performing

sensitivities to determine if the assumptions used

were reasonable; and

◦

Performed diagnostic testing for the remaining

estimates to identify and investigate any anomalies.

Based on the procedures performed and the evidence obtained, we

consider the valuation of the estimate of the present value of future

cash flows within the liability for incurred claims to be appropriate.

Independent auditors’ report to the members of Bupa Finance plc (continued)

27

Valuation of freehold property and investment property (Group)

Refer to Notes 4 and 5 (for accounting policy and financial

disclosures)

The Group holds significant freehold property and 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 £2,073m (2022: £2,210m) 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 valuation experts performed in accordance with

relevant industry guidelines.

The valuations are judgemental and involve 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 in the year, a

directors’ valuation is conducted to determine if the carrying amount

of the property remains appropriate and does not differ materially

from the fair value at the end of the year. At 31 December 2023

management obtained external valuations for £55m of the total

freehold property valuation, with the remaining balance being valued

by the Directors.

Investment properties

Investment properties of £776m (2022: £750m) 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, capital growth rate and expected rental yields.

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

as well as considered external benchmarks and external

forecasts;

•

For Directors’ valuations, using internal valuation experts

we have also challenged management’s inputs to the

valuation models, with reference to the most recent

external valuation.

Based on the procedures performed and the evidence obtained, we

consider the valuation of freehold property and investment property to

be appropriate.

Independent auditors’ report to the members of Bupa Finance plc (continued)

28

Impairment of goodwill or reversal of previous impairments to

other intangible and tangible assets (Group)

Refer to Note 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. Where there is any indication that a previous

impairment loss for an asset other than goodwill either no longer

exists or has decreased, the recoverable amount should be

estimated and an assessment performed of whether there should be

a reversal of an impairment loss.

Estimating and discounting the cash flow projections used in the

impairment assessments requires significant judgement. The key

assumptions include the discount rate and the forecast cash flows,

including the terminal growth rate.

We identified one CGU as having a higher risk of impairment (or

impairment reversal), namely Bupa Dental Care UK, and the

valuation of the goodwill and intangible assets in this CGU was an

area of audit focus. As disclosed in Note 3 of the financial

statements, there has been no change in the carrying value of the

goodwill relating to this CGU of £191m (2022: £191m) with

headroom in the goodwill impairment assessment of £72m (2022:

£nil).

We

performed

the

following

procedures

over

management’s

impairment assessment of the Bupa Dental Care UK CGU:

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 calculation.

•

Used our valuation experts to independently determine a

reasonable range for the CGU discount rate, using

external comparable market information where possible.

Assessed how the rate used by management compared

to that range and the sensitivity of rate changes to the

overall impairment assessment.

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 available clinician hours and the terminal growth

rates applied, and obtained supporting internal or external

information.

•

Performed sensitivity analyses on the key assumptions.

Impairment reversal assessment

•

Assessed whether the headroom identified represented

an increase in the estimated service potential of an asset

indicating a reversal of a previous impairment loss.

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 carrying value of goodwill in the Dental Care UK

CGU is reasonable and there was not sufficient evidence to support

any reversal of the previously recorded impairment to other intangible

and tangible assets.

Independent auditors’ report to the members of Bupa Finance plc (continued)

29

Classification, recognition and disclosure of certain liabilities

relating to Isapre Cruz Blanca (Bupa Chile) under IAS 37

Provisions, Contingent Liabilities and Contingent Assets

(Group)

Refer to Note 27 (for accounting policy and financial disclosures)

In 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,

including

retrospectively.

The

calculation of the impact of the ruling on Bupa Chile is dependent on

the approval of new legislation and detailed application guidelines

which will be issued by the Chilean Superintendent of Health.

During 2023 and 2024 the matter progressed through the legislative

process, including consideration of a number of different proposals

which could have a wide range of possible outcomes.

There is

considerable scope for the law to be either amended or rejected prior

to the legislative process concluding.

Given the uncertainty and the broad range of possible outcomes, 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 27. 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 classification, recognition and disclosure of the

contingent liability we performed the following procedures:

•

Critically challenged management's assessment that the

Supreme Court Ruling gives rise to a contingent liability,

specifically, that is not possible to determine a reliable

estimate;

•

Reviewed announcements made by the Superintendent of

Health relating to the application of the Supreme Court

Ruling;

•

Reviewed the draft laws and subsequent amendments

presented to the Chilean Senate, and the report issued by

the Senate Health Technical Commission;

•

Evaluated the methodology and assumptions used to

calculate the financial effect of the contingent liability for

Solvency II purposes as disclosed in note 27, 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.

Recoverability

of

Company’s

investment

in

subsidiaries

(Company)

Refer to Company accounting policy (j) and Note C (for financial

disclosures)

The Company holds investments in subsidiaries with a carrying

value of £4,337m (2022: £4,046m).

Where there are indicators of impairment 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 right of use

asset 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.

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 8 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.

Independent auditors’ report to the members of Bupa Finance plc (continued)

30

We identified a further 21 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 87% of Group Revenue, 85% of Group profit before taxation expense and 76% of Group Total assets.

We also performed audit procedures over the Group 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 our oversight of the work performed by auditors of the components included

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 on 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.

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 end 31

December 2023, the main audit risks are related to consistency of disclosures included within the Annual Report and 'other

information' including 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 2023.

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.

Independent auditors’ report to the members of Bupa Finance plc (continued)

31

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

£48.0 million (FY22: £30.8 million).

£26.4 million (FY22: £14.1 million).

How we determined it

5% of Profit before taxation expense adjusted for certain non-

recurring items

1% of Net 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 Profit before taxation expense adjusted for certain non-

recurring items, notably the giveback payments to Australia

Health Insurance customers 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 £4.0 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% (FY22: 75%) of overall materiality, amounting to £36.0 million

(FY22: £23.1 million) for the Group financial statements and £19.7 million (FY22: £10.6 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 £1.2m

(Group audit) (FY22: £1.2m) and £1.2m (Company audit) (FY22: £0.7m) 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;

•

Considering management’s assessment of the 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.

Independent auditors’ report to the members of Bupa Finance plc (continued)

32

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 2023 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.

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

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 in relation to its listed debt, and we considered the extent to which

Independent auditors’ report to the members of Bupa Finance plc (continued)

33

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 judgemental 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 3 years, covering the years ended 31 December 2021 to 31 December 2023.

Independent auditors’ report to the members of Bupa Finance plc (continued)

34

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

6 March 2024

Independent auditors’ report to the members of Bupa Finance plc (continued)

35

2023

2022

restated¹,²

Note

£m

£m

Insurance revenue

2, 12.1

10,770

10,033

Insurance service expenses

2.1, 12.1

(10,318)

(9,339)

Insurance service result before reinsurance contracts held

12.1

452

694

Net expense from reinsurance contracts held

12.2

(7)

(22)

Insurance service result

445

672

Care, health and other customer contract revenue

2.2

4,268

3,967

Other revenue¹

2.2

78

81

Total non-insurance revenue

4,346

4,048

Share of post-taxation results of equity-accounted investments¹

6

83

44

Impairment of goodwill and intangible assets

3

(17)

(894)

Other operating expenses¹

2.3

(4,292)

(4,093)

Other income and charges²

2.4

42

(11)

Total other expenses, income and charges

(4,184)

(4,954)

Profit/(loss) before financial income and expense

607

(234)

Financial income and expense

Financial income²

2.5

363

158

Financial expense

2.5

(190)

(174)

Financial (expense)/income from insurance contracts issued

2.5, 12.1

(25)

16

Net monetary loss¹

1.7

(18)

(25)

Net impairment on financial assets

(20)

(10)

Net financial income/(expense)

110

(35)

Profit/(loss) before taxation expense

717

(269)

Taxation expense¹

2.6

(177)

(130)

Profit/(loss) for the year

540

(399)

Attributable to:

Shareholder of Bupa Finance plc¹

538

(402)

Non-controlling interests

2

3

Profit/(loss) for the year

540

(399)

1.

Amounts have been restated for the adoption of IFRS 17. See Note 1.5.

2.

Surplus on fair value of investment property has been reclassified and is now presented within other income and charges (see Note 2.4).

Notes 1-28 form part of these consolidated financial statements.

Consolidated Income Statement

for the year ended 31 December 2023

36

2023

2022

restated¹

Note

£m

£m

Profit/(loss) for the year¹

540

(399)

Other comprehensive income/(expense)

Items that will not be reclassified to the Income Statement

Unrealised loss on revaluation of property

4

(15)

(44)

Remeasurement gain on pension schemes

7

–

3

Taxation credit on income and expenses recognised directly in other

comprehensive income

2.6

–

12

Items that may be reclassified subsequently to the Income Statement

Foreign exchange translation differences on goodwill

3

(55)

112

Other foreign exchange translation differences¹

(235)

332

Net gain/(loss) on hedge of net investment in overseas subsidiaries

73

(80)

Share of other comprehensive income of equity-accounted investments

2

2

Change in fair value of financial investments through other comprehensive

income

(4)

(4)

Change in ECL of financial investments through other comprehensive income

1

–

Realised loss on disposal of financial investments at fair value through other

comprehensive income

4

–

Change in cash flow hedge reserve

(7)

–

Release of foreign exchange translation reserve on closure of subsidiaries

(2)

4

Total other comprehensive (expense)/income

(238)

337

Comprehensive income/(expense) for the year

302

(62)

Attributable to:

Shareholder of Bupa Finance plc¹

302

(67)

Non-controlling interests

–

5

Comprehensive income/(expense) for the year

302

(62)

1.

Amounts have been restated for the adoption of IFRS 17. See Note 1.5.

Notes 1-28 form part of these consolidated financial statements.

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2023

37

2023

2022

restated¹

At 1 January

2022

restated¹

Note

£m

£m

£m

Assets

Goodwill and intangible assets

3

2,660

2,740

3,518

Property, plant and equipment

4

3,605

3,691

3,793

Investment property

5

776

750

666

Equity-accounted investments¹

6

1,056

997

885

Post-employment benefit net assets

7

2

2

1

Deferred taxation assets¹

8

95

127

64

Restricted assets

9

122

119

158

Financial investments

10

3,638

3,716

2,911

Derivative assets

11

46

28

41

Reinsurance contract assets¹

12.2

38

21

18

Current taxation assets

50

23

15

Inventories

13

76

91

93

Trade and other receivables¹

14

829

938

616

Assets held for sale

15

48

32

38

Cash and cash equivalents

16

2,278

1,403

1,739

Total assets

15,319

14,678

14,556

Liabilities

Subordinated liabilities

17

(747)

(998)

(997)

Other interest-bearing liabilities

17

(1,090)

(648)

(822)

Post-employment benefit net liabilities

7

(8)

(7)

(9)

Lease liabilities

18

(894)

(926)

(915)

Deferred taxation liabilities¹

8

(115)

(112)

(144)

Derivative liabilities

11

(63)

(137)

(35)

Provisions for liabilities and charges¹

19

(335)

(287)

(265)

Insurance contract liabilities¹

12.1

(2,608)

(2,378)

(2,191)

Current taxation liabilities

(35)

(34)

(55)

Trade and other payables¹

20

(2,417)

(2,308)

(2,114)

Liabilities associated with assets held for sale

15

(9)

(1)

(4)

Total liabilities

(8,321)

(7,836)

(7,551)

Net assets

6,998

6,842

7,005

Equity

Share capital

22

200

200

200

Foreign exchange translation reserve¹

241

437

91

Property revaluation reserve

601

634

655

Cash flow hedge reserve

(7)

–

–

Income and expenditure reserve¹

5,648

5,254

5,745

Equity attributable to shareholder of Bupa Finance plc

6,683

6,525

6,691

Restricted Tier 1 notes

21

297

297

297

Non-controlling interests

28

18

20

17

Total equity

6,998

6,842

7,005

6

1.

Amounts have been restated for the adoption of IFRS 17. See Note 1.5.

Approved by the Board of Directors and signed on its behalf on 6 March 2024 by

James Lenton

Director

Notes 1-28 form part of these consolidated financial statements.

Consolidated Statement of Financial Position

as at 31 December 2023

38

2023

2022

restated¹

Note

£m

£m

Cash flow from operating activities

Profit/(loss) before taxation expense¹

717

(269)

Adjustments for:

Net financial (income)/expense¹

(153)

26

Net monetary loss¹

1.7

18

25

Depreciation, amortisation and impairment

3, 4, 15

496

1,522

Other non-cash items¹

(162)

(49)

Changes in working capital and provisions:

Increase in insurance contract liabilities

342

131

Increase in reinsurance contract assets

(18)

(1)

Funded pension scheme employer contributions

(1)

(1)

Decrease/(increase) in trade and other receivables, and other assets

2

(191)

Increase in trade and other payables, and other liabilities¹

232

73

Cash generated from operations

1,473

1,266

Income taxation paid

(175)

(232)

Decrease in cash held in restricted assets

6

5

Net cash generated from operating activities

1,304

1,039

Cash flow from investing activities

Acquisition of subsidiaries and businesses, net of cash acquired

(63)

(29)

Investment in equity-accounted investments

6

(22)

(14)

Dividends received from associates

42

42

Disposal of subsidiaries and other businesses, net of cash disposed of

30

3

Purchase of intangible assets

3

(117)

(111)

Purchase of property, plant and equipment

4

(260)

(208)

Proceeds from sale of property, plant and equipment

19

7

Purchase of investment property

5

(38)

(29)

Disposal of investment property

5

–

1

Purchases of financial investments, excluding deposits with credit institutions

(1,983)

(1,720)

Proceeds from sale and maturities of financial investments, excluding deposits

with credit institutions

1,921

1,222

Net withdrawals from/(investments into) deposits with credit institutions

88

(119)

Interest received

241

82

Net cash used in investing activities

(142)

(873)

Cash flow from financing activities

Payment of Restricted Tier 1 coupon

21

(12)

(12)

Proceeds from issue of interest-bearing liabilities and drawdowns on other

borrowings

493

51

Repayment of interest-bearing liabilities and other borrowings

(342)

(194)

Principal repayment of lease liabilities

(148)

(135)

Payment of interest on lease liabilities

18

(49)

(46)

Interest paid

(66)

(64)

Net receipts/(payments) on settlement of hedging instruments

57

(57)

Dividends paid

(134)

(89)

Dividends paid to non-controlling interests

(2)

(2)

Net cash used in financing activities

(203)

(548)

Net increase/(decrease) in cash and cash equivalents

959

(382)

Cash and cash equivalents at beginning of year²

1,479

1,850

Effect of exchange rate changes

(76)

11

Cash and cash equivalents at end of year²

16

2,362

1,479

1.

Amounts have been restated for the adoption of IFRS 17. See Note 1.5.

2.

Includes restricted cash of £87m (2022: £78m) which are considered cash and cash equivalents along with cash balances classified as held for sale of £2m

(2022: £nil) and bank overdrafts of £1m (2022: £2m) which are not considered cash and cash equivalents in Note 16.

Notes 1-28 form part of these consolidated financial statements.

Consolidated Statement of Cash Flows

for the year ended 31 December 2023

39

Note

£m

£m

£m

£m

£m

£m

£m

£m

£m

2023

Balance as at 1 January 2023

200

437

634

–

5,254

6,525

297

20

6,842

Profit for the year

–

–

–

–

538

538

–

2

540

Other comprehensive income/(expense)

Unrealised loss on revaluation of property

4

–

–

(15)

–

–

(15)

–

–

(15)

Realised revaluation profit on disposal of

property

–

–

(5)

–

5

–

–

–

–

Foreign exchange translation differences on

goodwill

3

–

(55)

–

–

–

(55)

–

–

(55)

Other foreign exchange translation differences

–

(212)

(13)

–

(8)

(233)

–

(2)

(235)

Net gain on hedge of net investment in overseas

subsidiaries

25.3

–

73

–

–

–

73

–

–

73

Share of other comprehensive income of equity-

accounted investments

–

–

–

–

2

2

–

–

2

Change in fair value of financial investments

through other comprehensive income

–

–

–

–

(4)

(4)

–

–

(4)

Change in ECL of financial investments through

other comprehensive income

–

–

–

–

1

1

–

–

1

Realised loss on disposal of financial

investments at fair value through other

comprehensive income

–

–

–

–

4

4

–

–

4

Change in cash flow hedge reserve

–

–

–

(7)

–

(7)

–

–

(7)

Release of foreign exchange translation reserve

on closure of subsidiaries

–

(2)

–

–

–

(2)

–

–

(2)

Other comprehensive expense for the year,

net of taxation

–

(196)

(33)

(7)

–

(236)

–

(2)

(238)

Total comprehensive (expense)/income for

the year

–

(196)

(33)

(7)

538

302

–

–

302

Payment of Restricted Tier 1 coupon, net of

taxation

2.6, 21

–

–

–

–

(10)

(10)

–

–

(10)

Dividends to shareholder of the Company

–

–

–

–

(134)

(134)

–

–

(134)

Dividends paid to non-controlling interests

–

–

–

–

–

–

–

(2)

(2)

Balance as at 31 December 2023

200

241

601

(7)

5,648

6,683

297

18

6,998

Notes 1-28 form part of these consolidated financial statements.

Consolidated Statement of Changes in Equity

for the year ended 31 December 2023

40

Note

£m

£m

£m

£m

£m

£m

£m

£m

2022

Balance as at 1 January 2022, as previously

reported

200

92

655

5,800

6,747

297

17

7,061

Initial application of IFRS 17

1.5

–

(1)

–

(55)

(56)

–

–

(56)

Balance as at 1 January 2022, as restated

200

91

655

5,745

6,691

297

17

7,005

(Loss)/profit for the year¹

–

–

–

(402)

(402)

–

3

(399)

Other comprehensive income/(expense)

Unrealised loss on revaluation of property

4

–

–

(44)

–

(44)

–

–

(44)

Realised revaluation profit on disposal of

property

–

–

(6)

6

–

–

–

–

Remeasurement gain on pension schemes

7

–

–

–

3

3

–

–

3

Foreign exchange translation differences on

goodwill

3

–

112

–

–

112

–

–

112

Other foreign exchange translation differences¹

–

310

17

3

330

–

2

332

Net loss on hedge of net investment in overseas

subsidiaries

25.3

–

(80)

–

–

(80)

–

–

(80)

Share of other comprehensive income of equity-

accounted investments

–

–

–

2

2

–

–

2

Change in fair value of financial investments

through other comprehensive income

–

–

–

(4)

(4)

–

–

(4)

Release of foreign exchange translation reserve

on closure of subsidiaries

–

4

–

–

4

–

–

4

Taxation credit on income and expense

recognised directly in other comprehensive

income

2.6

–

–

12

–

12

–

–

12

Other comprehensive income/(expense) for

the year, net of taxation

–

346

(21)

10

335

–

2

337

Total comprehensive income/(expense) for

the year

–

346

(21)

(392)

(67)

–

5

(62)

Payment of Restricted Tier 1 coupon, net of

taxation

2.6, 21

–

–

–

(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, as restated

200

437

634

5,254

6,525

297

20

6,842

1.

Amounts have been restated for the adoption of IFRS 17. See Note 1.5.

Notes 1-28 form part of these consolidated financial statements.

Consolidated Statement of Changes in Equity (continued)

for the year ended 31 December 2023

41

Notes to the Consolidated Financial Statements

for the year ended 31 December 2023

2024.

49

Notes to the Consolidated Financial Statements (continued)

for the year ended 31 December 2023