Bupa Finance Plc Announces 2023 Half Year Results

BUPA Finance PLC

03 August 2023

 

Bupa Finance plc (Bupa Finance)

HALF YEAR STATEMENT FOR THE SIX MONTHS TO 30 JUNE 2023

Financial headlines¹

•	Revenue2 of £7.4bn was up 9% (HY 2022: £6.8bn) at Constant Exchange Rates (CER) with period-on-period growth across all lines of business and Market Units driven by: •     Customer volume growth with insurance customers increasing by over four million, provision customers increasing by one million and occupancy rates in aged care 4ppt higher period-on-period; and •   The impact of pricing action, as we seek to balance continued high inflation, remaining competitive for customers and maintaining discipline in our underwriting of insurance risk.
	This half year report for 2023 marks our first set of results reporting on the new IFRS 17 accounting standard for insurance contracts which does not impact the overall economics of our business or strategy, but does change the presentation of our results and specifically the following:
•	Under the new accounting rules, we are no longer able to hold certain provisions3 in Australia related to the COVID-19 pandemic. The absence of these provisions has led to significant fluctuations in both our restated H1 2022 and H1 2023 reported profits.
	Underlying profit4 before taxation of £321m was down 15% at CER (HY 2022: £379m). This was principally driven by Australian health insurance where: •      In the first half of 2022 we experienced lower claims frequency and higher margins due to the impact of COVID-19; and •    In the first half of 2023, costs associated with returning claims savings to customers increased to £231m (HY 2022: £109m). Profits in our other Market Units grew significantly driven by higher investment returns, customer volume growth and the impact of premium rate changes in the Chile Isapre business reducing losses.
	Statutory profit before taxation of £310m increased by 8% at AER (HY 2022: £286m) with the reduction in underlying profit offset by favourable movements in non-underlying items.
	Solvency II capital coverage ratio remains strong at 171%5 (FY 2022: 181%) with leverage (excluding IFRS 16 lease liabilities) of 20.1% (FY 2022: 19.4%).

Business context

	Our performance is driven by continued good customer volume growth in health insurance, increased activity in health provision and higher occupancy rates in aged care leading to period-on-period revenue growth in all lines of business.
	The announcement of a further return of £175m (A$320m) claims savings to Australian Health insurance customers in June takes the total financial impact of claims savings returned in H1 2023 to £231m (HY 2022: £109m).
	The global macro-economic, political and regulatory environment within which we operate remains uncertain, with high and more persistent levels of inflation than expected. Interest rates have risen in response as central banks have sought to tackle inflation. Through these challenging times we are committed to keeping our pricing as competitive as possible for our customers, maintaining a tight focus on efficiencies across the Group.

Iñaki Ereño, Bupa Group CEO, commented:

"These results reflect continuing good organic growth across our health insurance businesses, increased activity in our health provision businesses to meet growing customer demand and improving occupancy rates in aged care. We continue to be encouraged by the overall performance of the Group as we become an increasingly digital business while navigating market challenges.

"We are confident for the future and there is positive momentum behind our strategy and our ambition to be the world's most customer-centric healthcare company. We are seeing the results of our 3x6 strategy which continues to inspire our people in the delivery of great customer service alongside high standards of care. There is much to do, but we are well positioned to meet our customers' healthcare needs. We also remain focused on our purpose, as we support wider communities where we can while tackling environmental issues."

Market performance (all at CER)

•	Bupa Asia Pacific: Revenue increased by 1% to £2,773m. Excluding the financial impact of returning claims savings to customers, revenues increased by 5% to £3,004m. This was driven by pricing action, customer growth in Australian health insurance, higher occupancy in aged care and revenue growth in our Hong Kong6 business with higher volumes in health services. On a reported basis, underlying profit reduced by 84% to £40m as an increase in revenues was offset by a margin reduction in Australia Health insurance, following higher claims frequency and the cost of returning COVID-19 claims savings to customers.
•	Europe and Latin America: Revenue grew by 16% to £2,552m with every business unit delivering growth period-on-period driven by customer growth and pricing to keep pace with rates of inflation. Underlying profit increased by 107% to £145m in the year, driven by revenue growth and higher investment returns. In Bupa Chile, the regulator-approved GES7 pricing increases in the Isapre business in October 2022 significantly reduced reported losses. However, the outlook for this business remains uncertain as regulatory interventions  and legislative and judicial decisions remain unclear around the Isapre insurance sector (see note on Chile in the Financial Review section for further detail).
•	Bupa Global and UK: Revenue grew by 10% to £2,063m driven by higher customer volumes in insurance. Underlying profit increased by 112% to £142m driven by revenue growth and higher investment returns in UK Insurance and continued delivery of the turnaround in Bupa Global, our international private medical insurance (IPMI) business. UK Insurance profit was temporarily increased by the release of the return of premium provision (£59m) in response to deferred claims costs, a significant proportion of which are now expected to arise later in 2023 and into 2024 following evidence of increased deferred claims in the first half of 2023. UK Dental underlying losses also reduced as delivery of the turnaround strategy commenced.
•	Other businesses: Our businesses in Saudi Arabia and India have delivered significant growth, with underlying profit increasing by 112% to £43m largely driven by increased customer volumes in both businesses.

Financial position

•	Solvency II capital coverage ratio remained strong at 171% (FY 2022: 181%).
•	Leverage ratio is 28.0% (FY 2022: 27.3%) when including IFRS 16 lease liabilities. Excluding these liabilities, the leverage ratio is 20.1% (FY 2022: 19.4%). In the first half of the year, we repaid £250m of maturing Tier 2 debt, drawing down on our revolving credit facility to finance the repayment.
•	Net cash generated from operating activities increased by £208m period-on-period to £875m, driven by higher revenue and profitability across market units partly offset by higher claims frequency in Australia.

Other highlights

•	We launched Viva, a package of Group-wide health and well-being initiatives which will give all of Bupa's workforce access to health benefits by the end of 2023. Viva amounts to £26m of extra investment in our people's health each year and will help us to both recruit new employees and retain existing employees.
•	We scaled up our Healthy Cities programme to help us reach our goal of supporting one million people each year, an initiative that aims to improve peoples' health through the regeneration and restoration of nature.
•	We held our first Bupa Healthcare Symposium in May, a major clinical conference for leaders across the healthcare sector to discuss the challenges and opportunities we face together.
•	We hosted our Bupa eco-Disruptive Live event in July, an immersive experience showcasing our sustainability strategy alongside many of the start-ups from our eco-Disruptive programme (which is now in its third year) who are working to tackle the threat of climate change.
	Following the devastating earthquake in Türkiye in February, we approved a funding package of £3m for humanitarian aid and healthcare through our local business, Bupa Acibadem Sigorta.
	Our LUX MED team in Poland are maintaining their support for Ukrainian refugees who have been forced to flee the war. To date, we have provided 388,000 free treatments to over 217,000 people and have employed 271 healthcare workers from Ukraine.

Note on Chile

	As stated in the Full Year results for 2022, the Isapre insurance industry in Chile continues to be 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. In December 2022, the Supreme Court issued a ruling which requires Isapres to use a statutory risk factor table with retrospective effect - meaning product coverage is not matched by the ability to increase rates to reflect the cost of such coverage. The situation remains as described in the Full Year results for 2022, other than that the date by which the relevant regulator has to implement it has been extended from May 2023 to November 2023.
	The potential short- and long-term implications for Isapre Cruz Blanca are highly uncertain. Further details regarding the potential retrospective financial implications of these developments are included in the Financial Review.

Enquiries

Media

Mark Street (External Communications): [e-mail]

Duncan West (External Communications): [e-mail]

Investors

Gareth Evans (Treasury): [e-mail]

About Bupa Finance plc

Bupa Finance plc (the Company) is a company incorporated in England and Wales. The Condensed Consolidated Half Year Financial Statements comprise the financial results and position of the Company and its subsidiary companies (together referred to as the Group). The immediate and ultimate parent of the Company is The British United Provident Association Limited (the Parent), which is also the ultimate parent company of the Bupa Group (Bupa).

Bupa's purpose is helping people live longer, healthier, happier lives and making a better world. We are an international healthcare company serving over 43 million⁸ customers worldwide. With no shareholders, Bupa Group reinvests profits into providing more and better healthcare for the benefit of current and future customers.

We directly employ around 82,000 people, principally in the UK, Australia, Spain, Chile, Poland, New Zealand, Hong Kong, Türkiye, Brazil, Mexico, the US, Middle East and Ireland. We also have associate businesses in Saudi Arabia and India.

Disclaimer: Cautionary statement concerning forward-looking statements

This document may contain certain 'forward-looking statements'. Forward-looking statements often use words such as 'intend', 'aim', 'project', 'anticipate', 'estimate', 'plan', 'believe', 'expect', 'forecasts', 'may', 'could', 'should', 'will', 'continue' or other words of similar meaning. Statements that are not historical facts, including statements about the beliefs and expectations of The British United Provident Association Limited (Bupa) and Bupa's directors or management, are forward-looking statements. In particular, but not exclusively, these may relate to Bupa's plans, current goals and expectations relating to future financial condition, performance and results.

By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend upon future circumstances that may or may not occur, many of which are beyond Bupa's control and all of which are solely based on Bupa's current beliefs and expectations about future events. These circumstances include, among others, global economic and business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of governmental and regulatory authorities, risks arising out of health crises and pandemics, the impact of competition, the timing, impact and other uncertainties of future mergers or combinations within relevant industries. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual future condition, results, performance or achievements of Bupa or its industry to be materially different to those expressed or implied by such forward-looking statements. Recipients should not place reliance on, and are cautioned against relying on, any forward-looking statements. Except as required by any laws and regulations,, Bupa expressly disclaims any obligations or undertakings to release publicly any updates or revisions to any forward-looking statements to reflect any change in the expectations of Bupa with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Forward-looking statements in this document are current only as of the date on which such statements are made. No statement in this document is intended to be a profit forecast. Neither the content of Bupa's website nor the content of any other website accessible from hyperlinks on Bupa's website is incorporated into, or forms part of, this document.

Bupa Group CEO's review

These results reflect continuing good organic growth across many of our health insurance businesses, increased activity in our health provision businesses to meet growing customer demand and improving occupancy rates in aged care. We continue to be encouraged by the overall performance of the Group as we transform our businesses while navigating market challenges.

The macro-economic environment over the past year has presented challenges for all businesses. As an international healthcare company, we face into this from a position of strength with customer demand for our services growing. Our size enables us to be more competitive on costs and our increasing vertical integration across funding and provision affords us more control over the expense base.

We are committed to serving our customers across health insurance, provision and aged care, and we have made great progress since we launched the 3x6 strategy in March 2021. The strategy is inspiring our people to prioritise customer experience alongside high standards of care as well as transforming the organisation. In this way, we are 'running' and 'changing' Bupa at the same time. 

We are continuing to drive strong customer growth in our health insurance businesses across all of our Market Units. We're responding to increasing demand for high quality healthcare services and meeting changing customer needs by continuing to progress digital access to healthcare via Blua and our other digital health solutions. For example, we have over one million customers in the UK holding a digital account with us, giving them access to our healthcare apps.

In our health provision businesses, we are seeing the benefit of increasing customer demand for healthcare services. Occupancy rates have increased across all our aged care businesses as numbers continue to improve following the impact of the pandemic.

Our people are at the heart of our 3x6 strategy. This year we launched Viva, a package of health and wellbeing initiatives to help our employees worldwide. Viva represents the doubling of our spend on medical benefits and £26m of extra investment each year in our people's health. By the end of this year, all 82,000 of our people globally will have improved health benefits, with the vast majority using Bupa products. 

Outlook

Our outlook on the economic backdrop for the business is broadly unchanged since the full year results for 2022. We continue to see high levels of inflation increasing costs for our business and for our customers. The labour market in certain sectors continues to be a challenge impacting some aged care and provision businesses.

We are encouraged by the positive overall performance across the Group and how our businesses are transforming against the strategic mandates they are given as part of our portfolio management strategy. Bupa Global continues to deliver strong growth in profitability. In UK Dental, actions are well underway to exit loss-making practices and management are making good progress on their new strategy.

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 businesses. This risk is present in 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 present as at 30 June 2023, as summarised in the Financial Review. The situation remains highly uncertain with a broad range of possible outcomes from these exposures, which, depending on the outcome of the current uncertainty, could result in material liabilities arising and material ongoing losses within the Isapre business.

We are confident for the future and there is positive momentum behind our 3x6 strategy and our ambition to be the world's most customer-centric healthcare company. There is much to do, but we are well positioned to meet customer healthcare needs with an ever-increasing focus on health and wellbeing in society at large.

FINANCIAL REVIEW

Summary

	HY 2023	HY 2022 (AER)	% growth/ (decline)	HY 2022 (CER)	% growth/ (decline)
Revenue	£7.4bn	£6.7bn	10%	£6.8bn	9%
Underlying profit	£321m	£378m	(15)%	£379m	(15)%
Cash generated from operating activities	£875m	£667m	31%	n/a	n/a
Statutory Profit before tax	£310m	£286m	8%	n/a	n/a
Leverage (excl. IFRS 16)	20.1%	19.5%	(0.6)ppts	n/a	n/a
Leverage (incl. IFRS 16)	28.0%	26.8%	(1.2)ppts	n/a	n/a
Solvency	171%	181%	(10)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 in aged care. This was partially offset by a significant increase in the cost of returning claims savings to customers in Australian health insurance taking the total cost of the return in the first half of 2023 to £231m (HY 2022: £109m). Pricing action drove revenue growth across all lines of business as we seek to balance continued high inflation, remaining competitive for customers and maintaining discipline in our underwriting of insurance risk

Revenue in health insurance grew by 8% with customer growth of 9%⁹ period-on-period. Our businesses in the Europe and Latin America and Bupa Global and UK Market Units were the key drivers of growth while good growth in APAC was offset by the increased financial impact of returning of claims savings to customers under our COVID-19 customer support programme.

Our health provision businesses saw revenue growth of 12% driven by higher levels of activity and pricing action.

In aged care, revenue was up 8% as occupancy rates increased. All of our businesses in the UK, Spain, Australia and New Zealand contributed to the improvement.

Underlying profit (CER)

Group underlying profit decreased 15% to £321m (HY 2022: £379m). This was principally driven by Australian health insurance where in the first half of 2022 we experienced lower claims frequency and higher margins due to the impact of COVID-19. In the first half of 2023, costs associated with returning claims savings to customers increased to £231m (HY 2022: £109m). Profits in our other Market Units grew significantly driven by higher investment returns and customer volume growth. In part the impact of the return of premium release in UK insurance also contributed to the increase, along with premium rate changes in the Isapre business reducing losses.

Health insurance underlying profit decreased as growth in revenues and investment returns across all Market Units were offset by lower margins in Australian health insurance as claims frequency increased following lower claims frequency in H1 2022 due to the impact of COVID-19. Margins across our Europe and Latin America Market Unit improved, driven in part by the impact of premium rate changes in the Isapre business. In Bupa Global and UK, UK Insurance profit was temporarily increased by the release of the return of premium provision (£59m) in response to deferred claims costs, a significant proportion of which are now expected to arise later in 2023 and into 2024 following evidence of increased deferred claims in the first half of 2023.

Profitability grew strongly in health provision due to a favourable CPI update on our public private health partnership in Spain, improved margins and customer growth, except in Chile where provision volumes are lower as a result of challenges in the Isapre business.

Aged care returned to profitability in the period driven by increasing levels of occupancy. Price increases and higher government funding were broadly offset by the impact of higher operating expenses and staffing costs.

Group functions costs increased to £(49)m (HY 2022: £(32)m) mainly driven by higher interest rates on variable rate debt, an increase in centrally funded investments into ESG initiatives and higher staff costs.

Statutory profit

Statutory profit before taxation was £310m up 8% at AER (HY 2022: £286m), as the lower underlying result was offset by the movement in non-underlying items which totalled an £11m cost at HY 2023, compared with a £92m cost at HY 2022.

The key drivers of the movement in non-underlying items at HY 2023 were short-term fluctuations on investment returns where we reported a gain of £6m (HY 2022: £44m loss). Our return-seeking asset portfolio delivered a positive return in H1 2023, with higher yields seen on floating rate assets and relatively stable valuations on longer-dated funds with the adverse impact from higher yields being offset by tighter credit spreads. This compares to material mark-to-market losses we saw across the portfolio in H1 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 £12m (HY 2022: £18m loss).

Also included is a £16m (HY 2022: £17m) amortisation charge on intangible assets in Bupa Villages and Aged Care Australia following the government announcement to deregulate bed licences from 2024; and other items of  (£(11)m) (HY 2022: £(10)m) which primarily relates to restructuring.

	HY 2023 £m	HY 2022 £m
Bupa Asia Pacific at CER	40	254
Europe and Latin America at CER	145	70
Bupa Global and UK at CER	142	67
Other businesses at CER	43	20
Group functions	(49)	(32)
Consolidated underlying profit before taxation at CER	321	379
Foreign exchange re-translation on 2022 results (CER/AER)	-	(1)
Consolidated underlying profit before taxation at AER	321	378
Short-term fluctuation on investment returns inc. Mark to Market	6	(44)
Net loss on disposal of businesses and transaction costs on business combinations	(2)	(2)
Net property revaluation loss	-	(1)
Realised and unrealised foreign exchange gain/(loss)	12	(18)
Amortisation of bed licences	(16)	(17)
Other non-underlying items	(11)	(10)
Total non-underlying items	(11)	(92)
Statutory profit before taxation at AER	310	286

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 were 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 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 Half Year 2022 underlying profit from £280m to £363m¹⁰. This increase is mainly driven by the derecognition of the 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 1.4 of the 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. For HY 2023 the Group insurance service result was £176m (HY 2022: £315m) driving a combined operating ratio of 97% (HY 2022: 93%). The reduction in the insurance service result is driven by higher revenues across all market units, offset by lower margins in Australian health insurance due to higher claims frequency and increased cost of returning claims savings to customers. Margins across our Europe and Latin America market improved, driven in part by the impact of the GES price increase. In Bupa Global and UK, UK Insurance profit was temporarily increased by the release of the return of premium provision (£59m) in response to deferred claims costs, a significant proportion of which are now expected to arise later in 2023 and into 2024 following evidence of increased deferred claims in the first half of 2023.

Taxation

The Group's effective taxation rate for the period was 22% (HY 2022: 33%; FY 2022: (48)%), which is in line with the current UK corporation taxation rate of 23.5%.

The Group operates in the UK where new tax legislation to implement a global minimum top-up tax has been substantively enacted.  Since the newly enacted tax legislation in the UK is effective only from 1 January 2024, there is no current tax impact in the period (HY 2022: £nil). The Group has applied a temporary mandatory relief from deferred tax accounting for the impacts of the top-up tax, and instead accounts for it as a current tax when it is incurred.  If the top-up tax had applied in 2023, the impact would not have been material for the Group. 

Cash flow

Net cash generated from operating activities increased by £208m period-on-period to £875m driven by higher revenue and profitability across Market Units partially offset by higher claims frequency in Australia. Net cash flow from investing activities reduced by £234m to £503m driven by lower cash invested into financial assets versus the same period last year due to higher claims volumes in APAC coupled with higher cash balances in ELA. Higher cash repatriations reduced cash used in financing activities by £4m to £170m.

Funding

We manage our funding prudently to ensure a strong platform for continued growth. Bupa's policy is to maintain investment grade access to both the senior and subordinated bond markets. Fitch and Moody's reviewed Bupa's credit ratings during 2022 with Moody's changing the outlook for Bupa's ratings to stable from negative. There have been no rating changes in 2023.

We continue to hold a good level of Group liquidity. At 30 June 2023, our £900m Revolving Credit Facility was drawn by £381m (FY 2022: £70m). We used the facility in the first half of the year to repay a subordinated bond on its scheduled maturity date. 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 30 June 2023 was 20.1% ( FY 2022: 19.4%; HY 2022: 19.5%) and was 28.0% (FY 2022: 27.3%; HY 2022: 26.8% ) when IFRS 16 lease liabilities are included.

Chile - Isapre Cruz Blanca contingent liabilities

As disclosed in the 2022 Annual Report and Accounts, the Isapre insurance industry in Chile continues to be negatively impacted by judicial and regulatory action. We continue to recognise a material contingent liability as a result of the December 2022 Supreme Court ruling in Chile. The method of implementation of the statutory risk factor table following the Supreme Court decision of December 2022 remains unclear. Given the continuing uncertainty, Cruz Blanca is unable to reliably estimate the value of any such future retrospective payments, therefore, no IFRS provision has been recognised as at 30 June 2023.

There are a wide range of possible outcomes, however, in contrast to the requirements of IFRS, under Solvency II the Group is required to include a value for contingent liabilities, even if the amount of the obligation cannot be measured with sufficient reliability. The Group has included an allowance of £160m (FY 2022: £100m) for this contingent liability for retrospective payments within the Solvency II regulatory balance sheet. 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 this ruling would be liabilities for Isapre Cruz Blanca.

In addition, the regulator approved Garantias Explicitas en Salud (GES) pricing increases, in place since October 2022, are subject to judicialisation. A ruling is expected later in the year which could lead to liabilities for retrospective payments. The situation is uncertain and any potential financial impact is contingent on the future outcome of the judicialisation.

See the Commitments and Contingencies note (Note 19) within the financial statements for further details.

Solvency

Our solvency coverage ratio of 171%¹¹ 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 30 June 2023, the estimated SCR of £2.7bn was £0.05bn higher and Own Funds of £4.6bn was £0.3bn lower when compared to 31 December 2022.

Our surplus capital was estimated to be £1.9bn, compared to £2.2bn at 31 December 2022, representing a solvency coverage ratio of 171%¹¹ (FY 2022: 181%). Our business continued to generate capital through our underlying profitability. This capital generation was more than offset by the £250m repayment of Tier 2 subordinated debt, capital expenditure, and debt financing costs.

We perform an analysis of the relative sensitivity of our estimated solvency coverage ratio to changes in market conditions and underwriting performance. Each sensitivity is an independent stress of a single risk and before any management actions. The selected sensitivities do not represent our expectations for future market and business conditions. A movement in values of properties that we own continues to be the most sensitive item, with a 10% decrease having a 11 percentage point reduction to the solvency coverage ratio.

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

Risk Sensitivities	Solvency II coverage ratio
Solvency coverage ratio11	171%
Property values -10%	160%
Loss ratio worsening by 2%12	163%
Sterling depreciates by 20%	165%
Group Specific Parameter (GSP) +0.2%13	169%
Credit spreads +100bps (no credit transition)	170%
Interest rate -100bps	170%
Pension risk +10%	171%
Equity markets -20%	171%

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

MARKET UNIT PERFORMANCE

Bupa Asia Pacific

	Revenue	Underlying profit
HY 2023	£2,773m	£40m
HY 2022 (AER)	£2,759m	£257m
% growth	1%	(84)%
HY 2022 (CER)	£2,741m	£254m
% growth	1%	(84)%

(Commentary on a CER basis)

Excluding the impact of returning claims savings to Australian insurance customers, revenue increased 5%, primarily driven by Australian health insurance, an increase in Australia and New Zealand aged care occupancy, and revenue growth in Hong Kong due to higher volumes in health services. On a reported basis, revenue grew by 1% including a £231m reduction in revenue as a result of returning claims savings to customers (HY 2022: £109m).

Reported profit reduced as a result of returning COVID-19 claim savings to Australian health insurance customers and lower claims frequency in H1 2022 due to COVID-19.

We have continued to support our customers and, in June, announced the return of £175m (A$320m) to Australian health insurance customers under our COVID-19 customer support programme, taking the total support delivered to customers since the start of the pandemic to £0.7bn (A$1.27bn). The June cashback was on top of the six-month premium rate deferral from 1 April 2023 to 1 October 2023 that was announced earlier in the year. The customer support programme and the implementation of IFRS 17 has introduced significant fluctuations into our profits as we return claims savings to our customers.

Excluding the impact of returning claims savings, Australian health insurance, revenues increased by 6% as a result of strong growth in domestic and international customer numbers and the November 2022 premium rate increase. On a reported basis the combined operating ratio (COR) increased to 100% (HY 2022: 86%) as the cost of returning COVID-19 claim savings to customers increased and claims frequency was higher. Health Insurance has continued to deliver strong growth across all service propositions, including Blua (virtual GP consultations for international members), Healthcare Programmes (including rehabilitation and chemotherapy in the home) and Bupa Telehealth. We continue to negotiate with hospitals on new contracts, amidst increased indexation pressures from hospitals, including signing a two-year agreement with St John of God Health Care to deliver Bupa customers greater choice and access to services and to limit out of pocket costs.

Australian Health Services revenue was marginally lower due to a temporary policy change affecting the Bupa Medical Visa Services business which impacted assessment volumes, coupled with the closure of a small number of Australian dental clinics over the past year. Overall, underlying profit increased driven by dental. A new Microvascular Health Assessment, a first in the Australian optometry industry, was launched in Bupa Optical and Hearing, involving artificial intelligence assessing cardiovascular disease risk during a standard eye test.

In Australian Villages and Aged Care, revenue grew due to an increase in occupancy as the sector recovers from the impact of the COVID-19 pandemic. We are working through the implications of a revised funding model, following an announcement in October 2022 by the Australian Federal Government, with the objective of improving levels of care for residents and addressing funding shortfalls in the sector. Underlying losses reduced due to the benefit of higher revenue and lower operating costs, despite homes in regional areas continuing to face significant workforce challenges. Closing occupancy was 87% (HY 2022: 83%).

In New Zealand Villages and Aged Care, revenue increased due to higher occupancy, daily bed rate increases and additional government funding to support aged care nurse pay parity within the hospital sector. Closing occupancy was 91% (HY 2022: 85%).

In Hong Kong, revenue increased due to volume growth in Health Services and re-pricing in Insurance. Underlying losses increased due to higher insurance claims following the relaxing of COVID-19 mandates. This impact was partially offset by strong demand in Hong Kong Health Services for provision services, with the number of customers in the first half of the year increasing by over 200,000 relative to last year, and increased investment returns.

Europe and Latin America

Revenue

Underlying profit

HY 2023	£2,552m	£145m
HY 2022 (AER)	£2,108m	£66m
% growth	21%	118%
HY 2022 (CER)	£2,195m	£70m
% growth	16%	107%

(Commentary on a CER basis)

Revenue in our Europe and Latin America Market Unit grew by 16% to £2,552m as a result of strong customer growth and the impact of pricing action to keep pace with the impact of inflation. Underlying profit increased by 107% to £145m at CER driven by the increase in revenues whilst margins improved.

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. Underlying profits increased significantly driven by a stable COR, combined with higher revenues and investment returns. The COR for the half year was 93% (HY 2022: 93%). 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 June, we reached an average of 71,000 video consultations per month (compared to an average of 66,000 per month in June 2022).

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

In our hospitals business in Spain, revenue increased due to higher levels of activity and favourable CPI update on our public private health partnership. Underlying profit increased due to higher revenues and improved margins. We launched our new physiotherapy model, new clinical units and also announced plans for a new hospital in Madrid.

In Sanitas Mayores, our aged care business in Spain, revenue and underlying performance improved through higher occupancy levels and price increases. Closing occupancy rates increased to 95% (HY 2022: 91%).

In Bupa Chile, we returned to profitability in the first half of the year, due to operating efficiencies and revenue growth driven by regulator-approved price increases relating to a component of Isapre premiums  (Garantias Explicitas en Salud or GES) which cover the treatments and medical conditions which Chilean regulation stipulates as mandatory minimum cover by Isapres. This component has been applied at a rate which has resulted in significantly reduced losses in Isapre Cruz Blanca. However,  the GES increase is the subject of a Supreme Court action. The outcome of this is uncertain and, in a worst case, could mean the GES increase is cancelled with effect to the date the increase was first put in place (October 2022). Furthermore, Isapre pricing continues to be based on risk factor tables in line with the prior period. In December 2022, the Supreme Court issued a ruling which requires Isapres to use an alternative statutory risk factor table with retrospective effect. The method of implementation of the statutory risk factor table following the Supreme Court decision remains unclear. The deadline for such implementation has been extended to November 2023 and may be extended further. As detailed above in the financial review, contingent liabilities exist in relation to both the risk factor tables and GES uncertainties.

In Poland, LUX MED revenue increased and underlying profit was up as result of strong performance in health provision. Through the period, we have  maintained our support for Ukrainian refugees who have been forced to flee the war.

Bupa Acıbadem Sigorta, our health insurance business in Türkiye, delivered substantial revenue growth, driven by organic growth in customers and pricing increases to keep pace with higher rates of inflation. The business moved to profitability in the period due to an improved COR and higher investment returns. The economy is classified as being a hyperinflationary environment, leading to the application of IAS 29. A net monetary loss of £5m has been recorded outside of underlying profit for the period. Following the devastating earthquake in Türkiye in February, we approved a funding package of £3m for humanitarian aid and healthcare through our local business, Bupa Acibadem Sigorta.

Care Plus in Brazil delivered strong revenue growth in all lines of business. Underlying profits reduced for the period driven by a provision release for onerous contracts impacting the half year 2022 comparator.

Bupa Mexico delivered strong revenue and profit growth due to higher renewal rates in our insurance business combined with good performance from Bité Hospital which we acquired in the last quarter of 2022.

Bupa Global Latin America revenue increased due to higher volumes in the domestic health insurance market in Ecuador and higher price increases across the region. Underlying profits increased driven by higher revenue, investment returns and improved COR. In the period, we finalised an important alliance with Mapfre to jointly develop and offer new health products. The alliance commenced business in Peru and will gradually expand to other countries in Latin America.

Bupa Global and UK

	Revenue	Underlying profit
HY 2023	£2,063m	£142m
HY 2022 (AER)	£1,861m	£67m
% growth	11%	111%
HY 2022 (CER)	£1,874m	£67m
% growth	10%	112%

(Commentary on a CER basis)

We achieved good revenue growth in our Bupa Global and UK Market Unit of 10% to £2,063m driven by an increase in the number of UK Insurance and Bupa Global customers, improved occupancy rates in UK Care Services and increased customer activity in Health Services. Underlying profit grew by 112% due to the strong performance in UK Insurance and Bupa Global.

In UK Insurance, underlying profit increased through higher investment returns and strong revenue growth, as we grew by over 250,000 net customers across medical insurance, health trusts, dental insurance and cash plan in the first half of 2023. The UK Insurance profit  was temporarily increased by the release of the return of premium provision (£59m) in response to deferred claims costs, a significant proportion of which are now expected to arise later in 2023 and into 2024 following evidence of increased deferred claims in the first half of 2023.

We launched the Workplace Mental Health Advantage, a new proposition for corporates focused on early intervention and supporting their workforce to maintain good mental health. We continue to expand our digital services, passing a significant milestone with over one million customers holding a digital account, and we delivered record numbers of digital primary care appointments through our Blua Health app.

In Bupa Global, our IPMI business, revenue and profit improved driven by increased customer volumes in our continuing businesses and strong corporate revenue performance. Under the new regional commercial structure, we continue to make strong progress against targets to deliver long-term sustainable growth. We are achieving this by responding to the distinct needs of our customers and people across global locations, with a focus on maximising efficiency in our operating model, improving systems and digital support for our customers.

The combined operating ratio (COR) for Bupa Insurance Limited, the UK based insurance entity that underwrites both domestic and international insurance, was 93% (HY 2022: 95%).

UK Dental Care's underlying losses reduced as delivery of the turnaround strategy has commenced. This included the decision in March to close, sell or merge 85 of our 475 dental practices in the UK and Ireland, due to the national shortage of dentists to deliver NHS care and heightened operational challenges due to macro-economic pressures, rising inflation and energy costs. Bupa Dental Care is seeking to be an employer of choice, launching Viva, our new market-leading health benefits proposition, for UK frontline colleagues and clinicians¹⁴. 

UK Care Services, our aged care business, delivered good growth in revenue and occupancy has reached 89% so far in 2023 (HY 2022: 84%), which is higher than pre-pandemic levels (2019 average: 87%). We are working with local authorities to ensure fee increases match cost increases. Underlying profits increased, however our business continues to be impacted by sector-wide staffing challenges, high energy costs and other inflationary pressures. Digital transformation continues to progress at pace with electronic care planning in place in almost all care homes and a pilot for a new electronic medications management system underway.

Health Services delivered good growth in revenue and underlying losses reduced, driven by higher customer numbers in Clinics and the Cromwell Hospital and strong growth across all product and service lines. We opened five new clinics and nine partner centres as we ended our franchise agreement with Spire Healthcare. The Cromwell Hospital opened a new walk-in urgent care centre providing fast treatment for injuries and illnesses.

Other businesses

Revenue

Underlying profit

HY 2023	£4m	£43m
HY 2022 (AER)	£3m	£20m
% growth	30%	113%
HY 2022 (CER)	£3m	£20m
% growth	23%	112%

Underlying profit growth was very strong in the first half of 2023 driven by an increase in profits from Bupa Arabia. Customer growth was substantial across the associate businesses. 

BUSINESS RISKS

We described our main risks in the Risk section of the Annual Report and Accounts 2022, which are available on www.bupa.com. While economic volatility, information security and strategic workforce challenges remain heightened, the principal risks and themes previously identified at the 2022 year-end remain.

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

The macroeconomic environment is challenging in most markets we operate in. In particular, in many markets we are seeing heightened inflationary pressures and rising interest rates.

Heightened inflation, particularly in the UK, is likely to impact our businesses in a variety of ways, including: increased costs, higher interest rates impacting households, reduced personal expenditure and affordability issues, and changes in government funding levels. In all businesses we are taking actions to mitigate the impacts, including pricing action and cost control measures.

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

Governmental and regulatory policy risks: 

Changes in governmental and regulatory policy has consistently been one of our top risks given the nature of our businesses and this remains true. The situation affecting our Isapre business in Chile demonstrates that future legislation, regulation and government decisions could have a material impact on the Group. We continue to engage governments and regulators in the markets we operate in to understand and influence potential changes to ensure we are able to continue to deliver quality and value for our customers. 

Operational risks: 

Information Security and Privacy remain key risks for the Group. Our focus on information security, technology and operational resilience in recent years is supported by significant investment to uplift capability and capacity in this area across the Group.

Social and environmental risks: 

Climate change remains one of the major risks we face as a society and is a key area of focus for us as Sustainability is a core pillar of our 3x6 strategy. We closely manage our environmental impacts and promote positive environmental practices. A key focus is our commitment to become a net zero business by 2040 across all our operations and throughout our value chain, underpinned by our 1.5 degree aligned science-based targets.

We have identified our key climate-related risks over the short, medium and long term and these are set out in the Annual Report and Accounts 2022.

Our approach to risk management: 

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

BUPA AROUND THE WORLD

Bupa Asia Pacific

•	Bupa Health Insurance Australia, with 4.2m customers, is a leading health insurance provider in Australia and also offers health insurance for overseas workers and visitors.
	Bupa Health Services in Australia is a health provision business, comprising dental, optical, audiology, medical assessment services, and healthcare for the Australian Defence Force.
•	Bupa Villages and Aged Care Australia cares for around 5,200 residents across 59 homes. It also operates 1 retirement village in Australia.
•	Bupa Villages and Aged Care New Zealand cares for around 3,300 residents across 44 care homes. It also operates 37 retirement villages.
•	Bupa Hong Kong comprises a health insurance business with 419,000 customers and a Health Services business operating 78 medical centres providing healthcare services to around 689,000 customers.

Europe and Latin America

	Sanitas Seguros is the second largest health insurance provider in Spain with more than 2.2m customers.
•	Sanitas Dental provides dental services through 205 centres and third-party networks in Spain.
•	Sanitas Hospitales and New Services comprises four private hospitals and 47 medical, health and wellness clinics.
•	Sanitas Mayores cares for around 5,700 people in 43 care homes, operates four day-care centres and has professional home care services with digital medical support for seniors in Spain.
•	LUX MED is a leading private healthcare business in Poland, operating in health funding and provision through 15 hospitals and 270 private clinics with around 6.1m customers and 279,000 insurance customers.
•	Bupa Chile is a leading health funding and provision business serving more than 789,000 customers through the Isapre business and Bupa Chile Seguros and offering provision services to around 1.7m customers across four hospitals and 37 medical clinics.
•	Bupa Acıbadem Sigorta is Turkey's second largest health insurer, with products for corporate and individual customers, and has 1.4m customers.
•	Care Plus is a leading health insurance company in Brazil, with around 198,000 funding customers and 216,000 provision related customers, concentrated in São Paulo.
•	Bupa Mexico is a health insurer offering international and local private medical insurance to individuals and corporates in Mexico, with more than 467,000 customers. During 2022, we acquired Bite Medica, our first hospital in Mexico.
•	Bupa Global Latin America provides international health insurance and local health insurance in Latin America to more than 85,000 customers. It is headquartered in Miami and has operations in Ecuador, Dominican Republic, Guatemala, Panama, and Bolivia.

Bupa Global and UK

	Bupa UK Insurance is a leading health insurer with 3.3m customers across medical insurance, health trusts, dental insurance and cash plans.
•	Bupa Global serves over 364,000 IPMI customers and administers medical assistance for individuals, small businesses and corporate customers.
•	Bupa Dental Care is a leading provider of private dentistry, providing dental services through over 441 centres across the UK and the Republic of Ireland.
•	Bupa Care Services cares for around 6,400 residents in 120 care homes and 10 Richmond care villages.
•	Bupa Health Services comprises 46 health clinics, and the Cromwell Hospital.

Other businesses

We also have associate health insurance businesses in Saudi Arabia (Bupa Arabia) and India (Niva Bupa) and an interest in MyClinic in Saudi Arabia.

Bupa Finance plc

(Company Number 2779134)

Condensed Consolidated Half Year Financial Statements (unaudited)

Six months ended 30 June 2023

Bupa Finance plc

Condensed Consolidated Income Statement

for six months ended 30 June 2023 (unaudited)

		For six months ended 30 June 2023	For six months ended 30 June 2022  restated¹,²	For year ended 31 December 2022  restated¹,²
	Note	£m	£m	£m
Insurance revenue	2,13	5,234	4,809	10,033
Insurance service expenses	13	(5,051)	(4,480)	(9,339)
Insurance service result before reinsurance contracts held	13	183	329	694
Net expense from reinsurance contracts held	13	(7)	(14)	(22)
Insurance service result		176	315	672
Care, health and other customer contract revenue	3	2,130	1,893	3,967
Other revenue¹	3	37	40	81
Total non-insurance revenue	3	2,167	1,933	4,048
Share of post-taxation results of equity-accounted investments¹		44	17	44
Impairment of goodwill and intangible assets	7	-	-	(894)
Other operating expenses¹		(2,138)	(1,927)	(4,093)
Other income and charges²	4	13	9	(11)
Total other expenses, income and charges		(2,081)	(1,901)	(4,954)
Profit/(loss) before financial income and expense		262	347	(234)
Financial income and expense
Financial income²	5	158	22	158
Financial expense	5	(91)	(82)	(174)
Financial (expense)/income from insurance contracts held		(8)	22	16
Net monetary loss¹	1.5	(4)	(18)	(25)
Net impairment on financial assets		(7)	(5)	(10)
Net financial income/(expense)		48	(61)	(35)
Profit/(loss) before taxation expense		310	286	(269)
Taxation expense	6	(68)	(93)	(130)
Profit/(loss) for the period		242	193	(399)
Attributable to:
Shareholder of Bupa Finance plc		240	192	(402)
Non-controlling interests		2	1	3
Profit/(loss) for the period		242	193	(399)

1.	Amounts have been restated for the adoption of IFRS 17. Refer to Note 1.4.1.
2.	Surplus on fair value of investment property has been reclassified from financial income and expense and is now presented within other income and charges (see Note 4 and 5).

Notes 1-19 form part of these Condensed Consolidated Financial Statements.

Bupa Finance plc

Condensed Consolidated Statement of Comprehensive Income

for six months ended 30 June 2023 (unaudited)

		For six months ended 30 June 2023	For six months ended 30 June 2022  restated¹	For year ended 31 December 2022  restated¹
	Note	£m	£m	£m
Profit/(loss) for the period¹		242	193	(399)
Other comprehensive income/(expense)
Items that will not be reclassified to the Income Statement
Unrealised gain/(loss) on revaluation of property		-	11	(44)
Remeasurement gain on pension schemes	10	-	-	3
Taxation credit on income and expenses recognised directly in other comprehensive income		-	1	12
Items that may be reclassified subsequently to the Income Statement
Foreign exchange translation differences on goodwill	7	(92)	98	112
Other foreign exchange translation differences¹		(260)	275	332
Net gain/(loss) on hedge of net investment in overseas subsidiaries		81	(61)	(80)
Share of other comprehensive (expense)/income of equity-accounted investments		(1)	(5)	2
Change in fair value of financial investments through other comprehensive income		(1)	(6)	(4)
Change in ECL of financial investments through other comprehensive income		1	-	-
Release of foreign exchange translation reserve on closure of subsidiaries		-	4	4
Taxation credit on income and expenses recognised directly in other comprehensive income		-	3	-
Total other comprehensive (expense)/income		(272)	320	337
Comprehensive (expense)/income for the period		(30)	513	(62)
Attributable to:
Shareholder of Bupa Finance plc¹		(31)	512	(67)
Non-controlling interests		1	1	5
Comprehensive (expense)/income for the period		(30)	513	(62)

1.	Amounts have been restated for the adoption of IFRS 17. Refer to Note 1.4.1.

Notes 1-19 form part of these Condensed Consolidated Financial Statements.

Bupa Finance plc

Condensed Consolidated Statement of Financial Position

as at 30 June 2023 (unaudited)

		At 30 June 2023	At 31 December 2022  restated¹	At 30 June 2022  restated¹
	Note	£m	£m	£m
Assets
Goodwill and intangible assets	7	2,633	2,740	3,606
Property, plant and equipment	8	3,613	3,691	3,832
Investment property	9	717	750	700
Equity-accounted investments¹		972	997	951
Post-employment benefit net assets	10	2	2	2
Deferred taxation assets¹		172	127	99
Restricted assets	11	126	119	129
Financial investments	12	4,007	3,716	3,736
Derivative assets		58	28	25
Reinsurance contract assets¹	13	30	21	14
Current taxation assets		9	23	16
Inventories		89	91	91
Trade and other receivables¹		1,084	938	787
Assets held for sale	14	24	32	22
Cash and cash equivalents	15	1,548	1,403	1,553
Total assets		15,084	14,678	15,563
Liabilities
Subordinated liabilities	16	(746)	(998)	(997)
Other interest-bearing liabilities	16	(951)	(648)	(824)
Post-employment benefit net liabilities	10	(9)	(7)	(9)
Lease liabilities		(928)	(926)	(922)
Deferred taxation liabilities¹		(112)	(112)	(142)
Derivative liabilities		(83)	(137)	(113)
Provisions for liabilities and charges¹		(294)	(287)	(280)
Insurance contract liabilities¹	13	(2,916)	(2,378)	(2,634)
Current taxation liabilities		(52)	(34)	(61)
Trade and other payables¹		(2,246)	(2,308)	(2,083)
Liabilities associated with assets held for sale	14	-	(1)	(1)
Total liabilities		(8,337)	(7,836)	(8,066)
Net assets		6,747	6,842	7,497
Equity
Share capital		200	200	200
Foreign exchange translation reserve¹		178	437	396
Property revaluation reserve		618	634	677
Income and expenditure reserve¹		5,435	5,254	5,910
Equity attributable to shareholder of Bupa Finance plc		6,431	6,525	7,183
Restricted Tier 1 notes	17	297	297	297
Non-controlling interests		19	20	17
Total equity		6,747	6,842	7,497

1.	Amounts have been restated for the adoption of IFRS 17. Refer to Note 1.4.1.

Notes 1-19 form part of these Condensed Consolidated Financial Statements.

Bupa Finance plc

Condensed Consolidated Statement of Cash Flows

for six months ended 30 June 2023 (unaudited)

		For six months ended 30 June 2023	For six months ended 30 June 2022  restated¹,²	For year ended 31 December 2022  restated¹
	Note	£m	£m	£m
Cash flow from operating activities
Profit/(loss) before taxation expense¹		310	286	(269)
Adjustments for:
Net financial (income)/expense¹,²		(60)	65	26
Net monetary loss¹		4	18	25
Depreciation, amortisation and impairment		238	251	1,522
Other non-cash items¹,²		(51)	(35)	(49)
Changes in working capital and provisions:
Increase in insurance contract liabilities		629	377	131
Increase in reinsurance contract assets		(10)	7	(1)
Funded pension scheme employer contributions		-	-	(1)
Increase in trade and other receivables, and other assets		(68)	(93)	(191)
(Decrease)/increase in trade and other payables, and other liabilities¹		(37)	(105)	73
Cash generated from operations		955	771	1,266
Income taxation paid		(79)	(104)	(232)
(Increase)/decrease in cash held in restricted assets³	11	(1)	-	5
Net cash generated from operating activities		875	667	1,039
Cash flow from investing activities
Acquisition of subsidiaries and businesses, net of cash acquired		(25)	(12)	(29)
Investment in equity-accounted investments		(9)	(8)	(14)
Dividends received from associates		-	56	42
Disposal of subsidiaries and other businesses, net of cash disposed of		8	(7)	3
Purchase of intangible assets	7	(51)	(41)	(111)
Purchase of property, plant and equipment		(95)	(71)	(208)
Proceeds from sale of property, plant and equipment		4	6	7
Purchase of investment property	9	(13)	(12)	(29)
Disposal of investment property	9	-	1	1
Purchases of financial investments, excluding deposits with credit institutions		(1,042)	(908)	(1,720)
Proceeds from sale and maturities of financial investments, excluding deposits with credit institutions		790	471	1,222
Net investments into deposits with credit institutions		(150)	(242)	(119)
Interest received		80	30	82
Net cash used in investing activities		(503)	(737)	(873)
Cash flow from financing activities
Payment of Restricted Tier 1 coupon	17	(6)	(6)	(12)
Proceeds from issue of interest-bearing liabilities and drawdowns on other borrowings		317	106	51
Repayment of interest-bearing liabilities and other borrowings		(262)	(87)	(194)
Principal repayment of lease liabilities		(69)	(60)	(135)
Payment of interest on lease liabilities		(24)	(22)	(46)
Interest paid		(56)	(48)	(64)
Net payments on settlement of hedging instruments		(10)	(41)	(57)
Dividends paid		(58)	(15)	(89)
Dividends paid to non-controlling interests		(2)	(1)	(2)
Net cash used in financing activities		(170)	(174)	(548)
Net increase/(decrease) in cash and cash equivalents		202	(244)	(382)
Cash and cash equivalents at beginning of period³,⁴		1,479	1,850	1,850
Effect of exchange rate changes		(52)	29	11
Cash and cash equivalents at end of period³,⁴	15	1,629	1,635	1,479

1.	Amounts have been restated for the adoption of IFRS 17. Refer to Note 1.4.1.
2.	Amounts have been restated for the reclassification of surplus on fair value of investment property from financial income and expense to other income and charges (see Note 5).
3.	Amounts have been restated for IFRIC Agenda Decision Demand Deposits with Restrictions on Use arising from a Contract with a Third Party. Refer to Note 1.4.1.
4	Includes restricted cash of £84m (HY 2022: £83m; FY 2022: £78m) which is considered cash and cash equivalents along with bank overdrafts of £3m (HY 2022: £1m; FY 2022: £2m) which are not considered a component of cash and cash equivalents within Note 15.

Notes 1-19 form part of these Condensed Consolidated Financial Statements.

Bupa Finance plc

Condensed Consolidated Statement of Changes in Equity

for six months ended 30 June 2023 (unaudited)

		Share Capital	Foreign exchange translation reserve	Property revaluation reserve	Income and expenditure reserve	Total attributable to shareholder of Bupa Finance plc	Restricted Tier 1 notes	Non-controlling interests	Total equity
For six months ended 30 June 2023	Note	£m	£m	£m	£m	£m	£m	£m	£m
Balance as at 1 January 2023		200	437	634	5,254	6,525	297	20	6,842
Profit for the period		-	-	-	240	240	-	2	242
Other comprehensive income/(expense)
Realised revaluation profit on disposal of property		-	-	(1)	1	-	-	-	-
Foreign exchange translation differences on goodwill	7	-	(92)	-	-	(92)	-	-	(92)
Other foreign exchange translation differences		-	(248)	(15)	4	(259)	-	(1)	(260)
Net gain on hedge of net investment in overseas subsidiaries		-	81	-	-	81	-	-	81
Share of other comprehensive expense of equity accounted investments		-	-	-	(1)	(1)	-	-	(1)
Change in fair value of financial investments through other comprehensive income		-	-	-	(1)	(1)	-	-	(1)
Change in ECL of financial investments through other comprehensive income		-	-	-	1	1	-	-	1
Other comprehensive expense for the period, net of taxation		-	(259)	(16)	4	(271)	-	(1)	(272)
Total comprehensive (expense)/income for the period		-	(259)	(16)	244	(31)	-	1	(30)
Payment of Restricted Tier 1 coupon, net of taxation	17	-	-	-	(5)	(5)	-	-	(5)
Dividends to equity holders of the company		-	-	-	(58)	(58)	-	-	(58)
Dividends paid to non-controlling interests		-	-	-	-	-	-	(2)	(2)
Balance as at 30 June 2023		200	178	618	5,435	6,431	297	19	6,747

Notes 1-19 form part of these Condensed Consolidated Financial Statements.

		Share Capital	Foreign exchange translation reserve¹	Property revaluation reserve	Income and expenditure reserve¹	Total attributable to shareholder of Bupa Finance plc¹	Restricted Tier 1 notes	Non-controlling interests	Total equity¹
For year ended 31 December 2022	Note	£m	£m	£m	£m	£m	£m	£m	£m
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	1.4	-	(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		-	-	(44)	-	(44)	-	-	(44)
Realised revaluation profit on disposal of property		-	-	(6)	6	-	-	-	-
Remeasurement gain on pension schemes	10	-	-	-	3	3	-	-	3
Foreign exchange translation differences on goodwill	7	-	112	-	-	112	-	-	112
Other foreign exchange translation differences¹		-	310	17	3	330	-	2	332
Net loss on hedge of net investment in overseas subsidiaries		-	(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		-	-	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	17	-	-	-	(10)	(10)	-	-	(10)
Dividends to equity holders 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. Refer to Note 1.4.1.

Notes 1-19 form part of these Condensed Consolidated Financial Statements.

		Share Capital	Foreign exchange translation reserve¹	Property revaluation reserve	Income and expenditure reserve¹	Total attributable to shareholder of Bupa Finance plc¹	Restricted Tier 1 notes	Non-controlling interests	Total equity¹
For six months ended 30 June 2022	Note	£m	£m	£m	£m	£m	£m	£m	£m
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	1.4	-	(1)	-	(55)	(56)	-	-	(56)
Balance as at 1 January 2022, as restated		200	91	655	5,745	6,691	297	17	7,005
Profit for the period¹		-	-	-	192	192	-	1	193
Other comprehensive income/(expense)
Unrealised gain on revaluation of property		-	-	11	-	11	-	-	11
Realised revaluation profit on disposal of property		-	-	(2)	2	-	-	-	-
Foreign exchange translation differences on goodwill	7	-	98	-	-	98	-	-	98
Other foreign exchange translation differences¹		-	262	12	1	275	-	-	275
Net loss on hedge of net investment in overseas subsidiary companies		-	(61)	-	-	(61)	-	-	(61)
Share of other comprehensive expense of equity accounted investments		-	-	-	(5)	(5)	-	-	(5)
Change in fair value of financial investments through other comprehensive income		-	-	-	(6)	(6)	-	-	(6)
Release of foreign exchange translation reserve on closure of subsidiary		-	4	-	-	4		-	4
Taxation credit on income and expense recognised directly in other comprehensive income		-	2	1	1	4	-	-	4
Other comprehensive income/(expense) for the period, net of taxation		-	305	22	(7)	320	-	-	320
Total comprehensive income for the period		-	305	22	185	512	-	1	513
Payment of Restricted Tier 1 coupon, net of taxation	17	-	-	-	(5)	(5)	-	-	(5)
Dividends to equity holders of the company		-	-	-	(15)	(15)	-	-	(15)
Dividends paid to non-controlling interests		-	-	-	-	-	-	(1)	(1)
Balance as at 30 June 2022, as restated		200	396	677	5,910	7,183	297	17	7,497

1.	Amounts have been restated for the adoption of IFRS 17. Refer to Note 1.4.1.

Notes 1-19 form part of these Condensed Consolidated Financial Statements.

Bupa Finance plc

Notes to the Condensed Consolidated Financial Statements

for six months ended 30 June 2023 (unaudited)

1   Basis of preparation

1.1   Basis of preparation

Bupa Finance plc (the 'Company'), a company incorporated in England and Wales and domiciled in the United Kingdom, together with its subsidiaries (collectively the 'Group') is an international healthcare business, providing health insurance, treatment in clinics, dental centres and hospitals, and operating care homes. The immediate and ultimate parent of the Company is The British United Provident Association Limited (the 'Parent' or 'Bupa' and together with its subsidiaries, the 'Bupa Group').

The Condensed Consolidated Half Year Financial Statements of the Company as at and for the six months ended 30 June 2023 comprise those of the Company and its subsidiary companies.

The interim financial statements have been prepared in accordance with UK-adopted International Accounting Standard 34 Interim Financial Reporting and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. The interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2022, which have been prepared in accordance with UK-adopted international accounting standards, in conformity with the requirements of the Companies Act 2006. The interim financial statements have been prepared on the basis of the accounting policies set out in the annual financial statements for the year ended 31 December 2022 updated for the application of new and amended accounting standards as set out in Note 1.4.

The interim financial statements were approved by the Board of Directors of Bupa Finance plc on 2 August 2023.

The financial information contained in these interim financial statements does not constitute statutory accounts of Bupa Finance plc within the meaning of Section 434 of the Companies Act 2006. The comparative figures for the financial year ended 31 December 2022 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

1.2   Going concern

Following a detailed assessment of the Group's going concern status based on its current position and forecast results, along with scenario-based stress testing and reverse stress testing, the Directors have concluded that the Group has adequate resources to operate for at least the next 12 months from the approval of these financial statements. This assessment considered forecast and reasonably possible adverse changes to the Group's regulatory solvency, liquidity, access to funding and trading profitability over the next 12 months.

The assessment identified the risks and uncertainties most likely to impact the Group and considered the impact to the Group's businesses under a number of reasonably plausible severe scenarios as well as consideration of contingent liabilities. This included an updated 2023 review of potential adverse outcomes on the Isapre industry in Chile, as described in Note 19, including a wide range of outcomes given the inherent political and regulatory uncertainty surrounding the implementation of the Supreme Court judgement. Other scenarios considered included a worsening of the global inflationary outlook driven by strong wage inflation leading to a wage-price inflation spiral and subsequent recession, and a variety of local scenarios developed by each business unit with the majority focusing on strategic workforce-related risks impacting either the availability or cost of staff. Under each such scenario, significant short-term reductions in planned profitability and liquidity may arise, however the Group is expected to remain a going concern. The Group has access to a £900m revolving credit facility ('RCF') as described in Note 16. The Group expects to remain compliant with the RCF's covenants under stressed scenarios and may further draw down on the RCF in order to meet liquidity needs. Additional management actions would allow downside impacts to be further mitigated by reducing expenditure, obtaining additional funding or divesting investments or businesses.

Details of the Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Half Year 2023 Results Announcement. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review of the Half Year 2023 Results Announcement.

1.3   Accounting estimates and judgements

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

The areas involving a higher degree of judgement or complexity, or where estimates are significant to the Condensed Consolidated Financial Statements, are set out below. These have been updated to include ongoing judgements following the implementation of IFRS 17 Insurance Contracts. Details of judgements applied in the initial application of the standard have been included in Note 1.4 below. Changes in these estimates could lead to a material adjustment to the carrying value of the assets and liabilities in the next financial year. Further detail is in the related notes.

Area	Details	Note
Goodwill and intangible assets	Goodwill and intangible assets are recognised on acquired businesses based on fair values at the date of acquisition. Goodwill and intangible assets with indefinite lives are tested for impairment on an annual basis, or when there are indicators of impairment. Other intangible assets are tested for impairment when there are indicators of impairment. As at 30 June 2023, all CGUs and intangible assets were reviewed for indicators of impairment. Following the impairment at 31 December 2022, a full assessment was performed on Bupa Dental Care UK, the results of which are included in Note 7. Sources of estimation uncertainty Impairment tests include a number of sources of estimation uncertainty as the key assumptions used when modelling the recoverable amount include estimating the discount rate, terminal growth rate and the forecast cash flows. Estimation uncertainties within these cash flows vary by CGU. For provision business this includes the number of customers, available clinician hours, fee rates and operating expenses. Key estimation uncertainty in the period has been driven by economic volatility including the associated inflationary pressures across Bupa's key markets. This has primarily impacted the determination of appropriate discount rates. In addition, there is increased uncertainty in the underlying cash flow forecasts driven by this economic uncertainty. Accounting judgements Judgement has been applied to determine whether there is an indication of impairment to intangible assets and goodwill or an indication that impairments should be reversed for intangible assets. In making these judgements, the Group has considered current trading and future plans associated with each of the assets, along with external market factors, in order to assess whether a full valuation is required to assess for impairments or reversal of impairments.	7
Property valuations	The Group has a significant portfolio of care home, hospital and office properties. These are subject to periodic and at least triennial valuations performed by external independent valuers, with directors' valuations performed in intervening years. In addition, the Group has a significant portfolio of investment properties, primarily retirement villages in New Zealand. These properties are revalued annually. Sources of estimation uncertainty Significant assumptions for freehold properties are normalised earnings, average occupancy and capitalisation rates, whereas for investment property key assumptions are discount and capital growth rates. Accounting judgements In valuing care home property, a judgement is made on the highest and best use of the property. In the majority of cases this leads to the property being valued as part of a group of assets making up a going concern business using market-based assumptions. The business is valued on a fair maintainable trade basis with the fair value thus calculated being allocated to plant and equipment and bed licences where applicable at net book value (as a proxy for fair value), with the residual value being allocated to property.	8,9
Insurance contracts	Accounting Judgements Premium allocation approach (PAA) The Group exercises judgement in determining whether the PAA eligibility criteria are met at initial recognition. For a small number of insurance contracts, which have a coverage period that is greater than 12 months, the Group elects to apply the PAA, if at the inception of the contract the Group reasonably expects that it will provide a liability for remaining coverage that would not differ materially from the General Measurement Model.	13
	Sources of estimation uncertainty Best estimate of claims provisioning Estimates included in the insurance contract liabilities include expected claims payments and expenses required to settle existing insurance contract obligations. The key assumptions used in the calculation of the liability for incurred claims include claims development, claims costs inflation, medical trends and seasonality.
Provisions and contingent liability	The Group has circumstances arising in the ordinary course of business, including losses which might arise from  litigation, disputes, and interpretation of tax law or local regulations. Judgement is exercised in determining whether  the circumstances should give rise to the recognition of provisions or contingent liabilities. In the case of material contingent liabilities further judgment is required in arriving at appropriate disclosure of such matters.  Accounting judgement Significant judgment has been applied in assessing whether a contingent liability or provision exists as a result of the ruling issued by the Supreme Court in Chile that obliges Isapres to make use of a specific table of risk factors.	19

1.4   New and amended accounting standards

Except for the changes detailed below, the interim financial statements have been prepared on the basis of the accounting policies set out in the annual financial statements for the year ended 31 December 2022.

1.4.1   New and amended standards adopted by the Group

IFRS 17 Insurance Contracts

IFRS 17 sets out the principles for the recognition, measurement and presentation of insurance contracts and supersedes IFRS 4 Insurance Contracts. The Group has adopted IFRS 17 Insurance Contracts in these financial statements on a fully retrospective basis for the majority of the Group's business. The Group has used the fair value approach for a small legacy portfolio of individual health contracts in Brazil, as set out below.

Significant judgements on implementation of IFRS 17

On implementation of IFRS 17, significant judgements include the level of aggregation and the determination of the unit of account, the application of premium allocation approach (PAA), and the determination of which expenses are directly attributable to insurance contracts and the identification of onerous contracts. The key considerations made by the Group on application of IFRS 17 are set out below.

Refer to Note 1.3 for significant judgements and estimates relating to the application of IFRS 17 that are reassessed each reporting period.

Insurance contract classification

As a result of the Standard's specificity regarding the contracts that it is applicable to, the Group has reviewed contracts issued to customers by non-insurance businesses to ensure that no additional business has fallen within the scope of IFRS 17. This concluded that no additional contracts should be brought into scope on adoption of IFRS 17.

Level of aggregation

IFRS 17 defines a portfolio of insurance contracts as 'Insurance contracts subject to similar risks and managed together'. As the Group essentially sells one 'health insurance' product line, where cash flows are generally expected to respond similarly in direction and timing to changes in assumptions, and the Group manages the insurance business at geographic 'Business Unit' level, the Group has defined portfolios as insurance Business Units at a minimum, with further disaggregation if there are  business lines which are managed separately and have different risk profiles. Portfolios are further divided into groups of contracts for the identification of onerous contracts.

There is a presumption under the PAA that no contracts are onerous unless there are facts and circumstances that indicate otherwise. However, the requirement to identify onerous contracts means that business is generally accounted for at a level lower than portfolios, being profitability groupings. This is the basis on which the standard requires various assessments to be made, e.g. PAA eligibility.

Contract boundary and PAA

IFRS 17 requires a current measurement model for insurance contracts where estimates are remeasured each reporting period. Under the general measurement model (GMM), contracts are measured using the building blocks of discounted probability-weighted cash flows, an explicit risk adjustment, and a contractual service margin (CSM) representing the unearned profit of the contract which is recognised as revenue over the coverage period. An optional, simplified PAA is permitted for eligible short-duration contracts.

In applying the standard, the Group has reviewed its insurance and reinsurance contracts and considered the contract boundary for each type of policy. The majority of policies have a coverage period of one year or less. As a result, the Group has taken the available policy choice to apply the PAA to these contracts. This approach leads to simplified measurement and presentation relative to the GMM. 

The Group has a small number of policy groups with a coverage period of greater than a year. For these groups of contracts, the Group has assessed whether the measurement of the liability for remaining coverage (LFRC) under the PAA is expected to differ materially from that under the GMM. This required the use of a GMM and materiality thresholds determined by management for these policies, as well as the selection of reasonably expected scenarios against which eligibility is assessed. The majority of contracts are eligible for the PAA measurement model either automatically or through this assessment.

Liability for incurred claims

The liability for incurred claims (LFIC) is consistent under the GMM and the PAA. The LFIC is made up of the best estimate outstanding claims provision, expenses already incurred but not yet paid in relation to claims and the cost of handling incurred claims at the reporting date.

Liability for remaining coverage

The liability for remaining coverage (LFRC) under the PAA is valued at initial recognition based on premium received, less any directly attributable acquisition costs deferred. In subsequent periods, the LFRC is amortised to recognise the revenue and insurance expenses (insurance acquisition cash flows) on a passage of time basis over the coverage period. This is recognised on a straight line basis as the expected pattern of the release of risk during the coverage period does not differ significantly over the passage of time. If certain acquisition cash flows paid on new contracts are allocated to future renewals, outside the boundary of the current contract, the deferred portion is recognised in the carrying amount of the related portfolio of the insurance contract issued. Deferred acquisition costs relating to groups of contracts within their coverage period and insurance receivables are included within the LFRC,

For groups of contracts where all contracts have a coverage period of one year or less, the Group has taken the policy decision available to expense insurance acquisition cash flows as incurred. Where the contracts within a group have a coverage period that is greater than one year, this policy choice is not available and these amounts are deferred.

Under the PAA, a risk adjustment is recognised on all LFIC balances and on LFRC balances for onerous contracts issued. The Group has taken the decision to use a confidence level technique to estimate the risk adjustment.

Discounting

Discounting is optional for the LFRC carrying amount if the time between providing each part of the coverage and the related premium due date is one year or less and is optional for the LFIC if claims are expected to be paid in one year or less from the date the claims are incurred.

The Group does not apply discounting to the majority of policies. However, at transition, Bupa Acıbadem Sigorta has applied discounting to both the LFRC and LFIC due to the high interest rate and high inflation environment in Türkiye and Bupa Global have applied discounting to LFIC as a proportion of claims are settled in a period in excess of one year. In addition, the LFRC for the legacy individual health policies in Brazil has been discounted due to the long-term nature of these contracts as detailed below. Where discounting is applied, the Group policy is to use European Insurance and Occupational Pensions Authority (EIOPA) specified discount rates.

Onerous contracts

To identify potentially onerous contracts, the Group has considered information reviewed by senior management in monitoring financial performance. The Group assumes that no PAA contracts are onerous at initial recognition. Where facts and circumstances are identified that may indicate an onerous contract exists, detailed testing is performed. The loss component is valued by comparing the carrying amount of the LFRC to the estimated fulfilment cash flows which include an assessment of the risk adjustment using a confidence level approach. In subsequent periods, the loss component is reassessed and any movements are recognised within the Condensed Consolidated Income Statement.

Key estimation uncertainty is driven by the future cash flows which are uncertain due to their timing, size and, or probability. The underlying cash flows are determined by forecasting future claims based on internal and external historical claims and other experience data and updated to reflect current expectations of future events and current conditions at the reporting date.

Legacy individual health policies in Brazil

The Group has a small legacy portfolio of individual health contracts in Brazil. On transition to IFRS 17, the contract boundary of the policies has been deemed to be the lifetime of the policyholders due to mandatory renewal clauses included in the policies. These contracts are onerous and a GMM valuation has been used to calculate the loss component of £47m at transition on 1 January 2022. The loss component has been discounted due to the long-term nature of these contracts. IFRS 17 has been implemented for these contracts using the fair value approach.

Insurance service expenses

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

Return of COVID-19 claims savings

In Australia Health Insurance, premium rate increase deferrals have been implemented to return claims savings to customers. The reduced premium received from customers is recognised on a passage of time basis over the policy coverage period.

In addition, Australia Health Insurance have announced cash payments to customers. A provision is recognised at the point the Group formally announces the cash payments and insurance revenue recognised within the Condensed Consolidated Income Statement is reduced accordingly. The provision is subsequently utilised on payment to the eligible customers. As the payment reflects a distinct promise associated with the return of COVID-19 savings to customers, the provision is reflected as a non-distinct investment component.

Restatements

The Group's net assets at transition on 1 January 2022 were reduced by £56m. The primary adjustments impacting net assets were:

-	the write off of deferred acquisition costs (DAC) assets
-	the recognition of the loss component on onerous contracts in excess of the unexpired risk reserve (URR) held under IFRS 4
-	in the Group's Australian insurance business, the derecognition of the deferred claims liabilities which cannot be held under IFRS 17 and the change in recognition of premium deferrals.

Other adjustments include changes to the net monetary loss recognised under IAS 29 Financial Reporting in Hyperinflationary Economies as a result of IFRS 17 deeming all components of an insurance contract to be monetary items. Taxation has been restated to reflect the taxation impact of the above adjustments. Any deferred taxation assets recognised on the adoption of IFRS 17 should unwind through the Condensed Consolidated Income Statement in future periods, as and when taxation deductions are taken, alongside the associated impact to current taxation.

Restatement of the legacy individual health portfolio in Brazil, adopted using the alternate fair value approach, is not shown separately due to the low value of that portfolio.

	Total
1 January 2022	£m
Net assets under IFRS 4	7,061
Derecognition of DAC	(136)
Recognition of loss component for onerous contracts in excess of URR	(76)
Derecognition of deferred claims liabilities and change in recognition of premium deferrals	163
Other adjustments	(15)
Taxation adjustments	8
Net assets under IFRS 17	7,005

	As published	Reclassification	Measurement	Restated
1 January 2022	£m	£m	£m	£m
Equity-accounted investments	905	-	(20)	885
Assets arising from insurance business	1,380	(1,244)	(136)	-
Deferred taxation assets	89	-	(25)	64
Reinsurance contract assets	-	18	-	18
Trade and other receivables	618	(2)	-	616
Deferred taxation liabilities	(177)	-	33	(144)
Provisions arising from insurance contracts	(3,237)	3,237	-	-
Provisions for liabilities and charges	(270)	5	-	(265)
Insurance contract liabilities	-	(2,283)	92	(2,191)
Other liabilities arising from insurance business	(213)	213	-	-
Trade and other payables	(2,170)	56	-	(2,114)
Total net asset restatement		-	(56)

The 30 June 2022 and 31 December 2022 comparatives have also been restated for the impact of applying IFRS 17. The impact on profit for the period and net assets are set out in the tables below.

	Total
30 June 2022	£m
Profit after tax under IFRS 4	129
Derecognition of DAC	(28)
Recognition of loss component for onerous contracts in excess of URR	7
Derecognition of deferred claims liabilities and change in recognition of premium deferrals	122
Other adjustments	(4)
Taxation adjustments	(33)
Profit after tax under IFRS 17	193

	As published	Reclassification	Measurement	Restated
30 June 2022	£m	£m	£m	£m
Equity-accounted investments	985	-	(34)	951
Assets arising from insurance business	2,122	(1,950)	(172)	-
Deferred taxation assets	167	-	(68)	99
Reinsurance contract assets	-	14	-	14
Trade and other receivables	788	(1)	-	787
Deferred taxation liabilities	(185)	-	43	(142)
Provisions arising from insurance contracts	(4,407)	4,407	-	-
Provisions for liabilities and charges	(372)	92	-	(280)
Insurance contract liabilities	-	(2,863)	229	(2,634)
Other liabilities arising from insurance business	(229)	229	-	-
Trade and other payables	(2,155)	72	-	(2,083)
Total net asset restatement		-	(2)

	Total
31 December 2022	£m
Loss after tax under IFRS 4	(418)
Derecognition of DAC	(19)
Recognition of loss component for onerous contracts in excess of URR	(11)
Derecognition of deferred claims liabilities and change in recognition of premium deferrals	81
Other adjustments	(14)
Taxation adjustments	(18)
Loss after tax under IFRS 17	(399)

	As published	Reclassification	Measurement	Restated
31 December 2022	£m	£m	£m	£m
Equity-accounted investments	1,032	-	(35)	997
Assets arising from insurance business	1,626	(1,470)	(156)	-
Deferred taxation assets	146	-	(19)	127
Reinsurance contract assets	-	21	-	21
Trade and other receivables	939	(1)	-	938
Deferred taxation liabilities	(121)	-	9	(112)
Provisions arising from insurance contracts	(3,709)	3,709	-	-
Provisions for liabilities and charges	(290)	3	-	(287)
Insurance contract liabilities	-	(2,528)	150	(2,378)
Other liabilities arising from insurance business	(221)	221	-	-
Trade and other payables	(2,353)	45	-	(2,308)
Total net asset restatement		-	(51)

IAS 1 amendments

The Group has adopted Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) from 1 January 2023. The amendments aim to help improve accounting policy disclosures for the primary users of financial statements. Entities must disclose material accounting policies, rather than the previous requirement to disclose significant accounting policies, and the concept of materiality in the context of accounting policies is further defined. The accounting policy disclosures provided for IFRS 17 above are in line with the new requirements and all material accounting policies will be disclosed in the annual financial statements for the year ended 31 December 2023.

IAS 8 amendments

The Group has adopted Definition of Accounting Estimates (Amendments to IAS 8) from 1 January 2023. The amendments introduce the definition of accounting estimates and include further amendments to help entities distinguish changes in accounting estimates from changes in accounting policies. On adoption there was no impact on the Group. Any future changes in accounting estimate or changes in accounting policy will be assessed under the new requirements.

Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)

The Group has adopted Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) from 1 January 2023. The amendments remove a previous deferred tax recognition exemption for transactions that give rise to equal taxable and deductible temporary differences on initial recognition. A lessee's recognition of assets and liabilities on inception of a lease is potentially such a transaction, depending on applicable tax law. The Group previously accounted for deferred tax on leases on a net basis in certain jurisdictions. As a result of adopting the amendments, in these jurisdictions the Group recognised separate deferred taxation assets on the lease liabilities and deferred taxation liabilities on the right-of-use assets of £16m each at 31 December 2022 (1 January 2022: £15m, 30 June 2022: £15m). As these balances qualify for offset, there was no impact on the Consolidated Statement of Financial Position.

International Tax Reform-Pillar Two Model Rules (Amendments to IAS 12)

The Group has adopted International Tax Reform-Pillar Two Model Rules (Amendments to IAS 12) from 1 January 2023. Pillar Two seeks to establish a 15% global minimum tax rate for multinational enterprises. On 20 June 2023, Finance (No.2) Bill 2023, which implements a domestic top-up tax and a multinational top-up tax in the UK effective for accounting periods starting on or after 31 December 2023, was substantively enacted. If the top-up tax had applied in 2023, the impact would not have been material for the Group. The IAS 12 amendments provide a temporary mandatory exception from deferred tax accounting for the Pillar Two top-up tax, which the Group has applied. The amendments also require additional qualitative and quantitative disclosures about the actual and potential impact of Pillar Two taxes. The Group will first provide these disclosures in its Consolidated Financial Statements for the year ended 31 December 2023.

IFRS Interpretations Committee decision Demand Deposits with Restrictions on Use arising from a Contract with a Third Party (IAS 7 Statement of Cash Flows)

In March 2022, the IFRS Interpretations Committee (IFRS IC) published its final agenda decision Demand Deposits with Restrictions on Use arising from a Contract with a Third Party (IAS 7 Statement of Cash Flows). This agenda decision considered whether an entity should include a demand deposit as a component of cash and cash equivalents in its statement of cash flows and financial position when the demand deposit is subject to contractual restrictions on use agreed with a third party.

The IFRS IC concluded that restrictions on the use of a demand deposit arising from a contract with a third party do not result in the deposit no longer being cash unless those restrictions result in the deposit no longer meeting the definition of cash. A deposit still meeting this definition would be presented as part of cash and cash equivalents on the statement of financial position, although it could be presented separately if relevant to an understanding of an entity's financial position. Such a deposit would also be considered part of cash and cash equivalents on the statement of cash flows.

The Group has reviewed the nature of its restricted assets and concluded that certain amounts should be considered part of cash and cash equivalents on the Consolidated Statement of Cash Flows. The Consolidated Statement of Cash Flows for the six months ended 30 June 2022 has therefore been restated, resulting in an increase in cash and cash equivalents at the beginning of the period of £112m, an increase in cash and cash equivalents at the end of the period of £83m and a reduction in decrease in cash held in restricted assets of £29m. This restatement had no impact on the Consolidated Statement of Financial Position. All restricted assets continue to be presented separately on the face of the Consolidated Statement of Financial Position. The agenda decision was previously implemented in the Group's annual financial statements for the year ended 31 December 2022 and no restatement of comparative amounts for that period is required.

Other

A number of amended standards became applicable for the current reporting period. The Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these amended standards.

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

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

In October 2022 the International Accounting Standards Board (IASB) issued Non-current Liabilities with Covenants (Amendments to IAS 1). The amendments clarify that the need to comply with covenants beyond the reporting date does not prevent a liability from being classified as non-current. Entities must disclose any such liability balances along with the presence and nature of relevant covenants and additionally disclose if the covenants are likely to be breached within the following twelve months. The amendments are effective from 1 January 2024. The application of these amendments is currently being evaluated by the Group. The amendments may impact the classification of certain liabilities as current or non-current and require additional disclosure, but are expected to have no other impact on recognition or measurement.

1.5   Foreign exchange

The following significant exchange rates applied during the period:

	Average rate				Closing rate
	30 June 2023	31 December 2022	30 June 2022		30 June 2023	31 December 2022	30 June 2022
Australian dollar	1.83	1.78	1.80		1.91	1.77	1.77
Brazilian real	6.25	6.38	6.59		6.09	6.38	6.37
Chilean peso	994.36	1,076.32	1,071.81		1,017.72	1,023.92	1,117.88
Danish krone	8.50	8.73	8.83		8.66	8.39	8.64
Euro	1.14	1.17	1.19		1.16	1.13	1.16
Hong Kong dollar	9.67	9.68	10.16		9.95	9.42	9.55
Mexican peso	22.40	24.88	26.32		21.78	23.54	24.54
New Zealand dollar	1.98	1.94	1.96		2.07	1.91	1.95
Polish zloty	5.28	5.50	5.51		5.16	5.28	5.46
Saudi riyal	4.63	4.64	4.87		4.76	4.54	4.57
Turkish lira¹	33.04	22.58	20.32		33.04	22.58	20.32
US dollar	1.23	1.24	1.30		1.27	1.21	1.22

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

Türkiye is a hyperinflationary economy and IAS 29 Financial Reporting in Hyperinflationary Economies has been applied from June 2022 onwards. As a consequence, the results and balances for the Group's Turkish operations have been adjusted for changes in the general purchasing power of the Turkish lira. In order to make this adjustment the Group refers to the CPI index published by the Turkish Statistical Institute. The value of CPI at 30 June 2023 was 1,351.59 (HY 2022: 977.88; FY 2022: 1,128.40) and the movement in CPI for the period ended 30 June 2023 was 223.19 (HY 2022: 290.93; FY 2022: 441.45), an increase of 19.8% (HY 2022: 42.4%; FY 2022: 64.3%). The introduction of IFRS 17 has impacted the application of IAS 29 in prior periods as it deems all components of an insurance contract to be monetary items, whereas under IFRS 4, the unearned premium provision and deferred acquisition costs were deemed to be non-monetary items. This has led to the restatement of the monetary loss and the net impact to profit before taxation for HY 2022 and FY 2022.

A loss of £4m (HY 2022 (restated): £18m; FY 2022 (restated): £25m) arising from the devaluation of net monetary assets has been recognised within net financial expense in the Condensed Consolidated Income Statement. This includes the impact of indexing amounts in the Condensed Consolidated Income Statement for the application of IAS 29, reducing profit before taxation by £5m for the period (HY 2022 (restated): £18m; FY 2022 (restated): £29m).

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

All Turkish lira amounts are translated to the Group's presentation currency of sterling, using the closing exchange rate in effect on 30 June 2023 of 33.04 (HY 2022: 20.32; FY 2022: 22.58). The impact of this adjustment is recorded within other foreign exchange translation differences in the Condensed Consolidated Statement of Comprehensive Income and within the foreign exchange translation reserve in the Condensed Consolidated Statement of Financial Position. The Group recognises the remaining exchange difference arising on consolidation within other foreign exchange translation differences through other comprehensive income in the foreign exchange translation reserve.

2   Operating segments

The Group operates in three Market Units, Bupa Asia Pacific; Europe and Latin America; and Bupa Global and UK. Management monitors the operating results of the Market Units separately to assess performance and make decisions about the allocation of resources. The Group's associate investments, Bupa Arabia and Niva Bupa are reported within Other businesses.

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

A key performance measure of operating segments utilised by the Group is underlying profit. Underlying profit is used to distinguish underlying profit from other constituents of the IFRS reported profit before taxation not directly related to the trading performance of the business. This measurement basis has been updated in 2023 to maintain consistency with the metric used internally for managing the business.

The following changes have been made to the metric:

-

Investment property returns have been included within underlying profit.

-

Financial investment returns have been included in Market Unit underlying profit to better reflect expected financial asset returns. This includes the actual returns on cash, cash-like instruments and assets where returns do not fluctuate with market movements. Expected returns are used for return-seeking asset portfolios. Short-term fluctuations on investment returns are removed from underlying profit as they are not related to underlying trading performance.

Presentational updates have been made to show revenue before IAS 29 adjustments, which reflects the view that is presented to management. In addition, Group investment funding costs, which principally include investment in ESG initiatives, have been presented separately.

The segmental tables have been restated to reflect the revised definition of underlying profit. A reconciliation between the old and new definition of underlying profit, including the impacts of IFRS 17, is included under the tables for HY 2022 and FY 2022.

Underlying profit

The following items are excluded from underlying profit:

-	Impairment of intangible assets and goodwill arising on business combinations - these impairments are considered to be one-off and not reflective of the in-year trading performance of the business.
-	Short-term fluctuations on investment return - underlying profit includes an expected long-term investment return over the period for return-seeking financial assets. Any variance between the total investment return (including realised and unrealised gains) and the expected return over the period is not included in underlying profit. These fluctuations are not related to underlying trading performance.
-	Net gains/losses on disposal of businesses and transaction costs on business combinations - gains/losses on disposal of businesses that are material and one-off in nature to the reportable segment are not considered part of the continuing business. Transaction costs that relate to material acquisitions or disposals are not related to the ongoing trading performance of the business.
-	Net property revaluation gains/losses - short-term fluctuations which would distort underlying trading performance. This includes deficit on the revaluation of freehold properties and property impairment losses.
-	Realised and unrealised foreign exchange gains/losses - fluctuations outside of management control, which would distort underlying trading performance. This includes the net impact of applying hyperinflationary accounting.
-	Amortisation of bed licences - following the Australian Government's announcement of the deregulation of bed licences from 1 July 2024, their amortisation term was reviewed and updated from having an indefinite useful life to amortising over the period to 1 July 2024. The impact of this is not considered reflective of the trading performance of the business.
-	Other Market Unit/Group non-underlying items - includes items that are considered material to the reportable segment or Group and are not reflective of ongoing trading performance. This includes items such as restructuring costs and profit or loss amounts related to changes to strategic investments.

The total underlying profit of the reportable segments is reconciled below to the profit before taxation expense in the Condensed Consolidated Income Statement.

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

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

	Bupa Asia Pacific	Europe and Latin America	Bupa Global and UK	Other businesses	Group Functions	Adjustments²	Total
For six months ended 30 June 2022 (restated)¹	£m	£m	£m	£m	£m	£m	£m
Revenues
Insurance revenue	2,136	1,393	1,269	-	-	11	4,809
Inter-Market Unit revenue	(27)	-	27	-	-	-	-
Insurance revenue for reportable segments	2,109	1,393	1,296	-	-	11	4,809
Care, health and other customer contract revenue	620	709	564	-	-	-	1,893
Other revenue¹	30	6	1	3	-	-	40
Non-insurance revenue for reportable segments	650	715	565	3	-	-	1,933
Total revenue reportable for segments	2,759	2,108	1,861	3	-	11	6,742
Segmental result
Underlying profit for reportable segments¹	257	66	67	20	(1)	-	409
Borrowing costs	-	-	-	-	(31)	-	(31)
Consolidated underlying profit before taxation expense	257	66	67	20	(32)	-	378
Non-underlying items:
Short-term fluctuation on investment returns	(11)	-	(34)	-	1	-	(44)
Net gain/(loss) on disposal of businesses and transaction costs on business combinations	4	(2)	-	(4)	-	-	(2)
Net property revaluation loss	-	-	(1)	-	-	-	(1)
Realised and unrealised FX gain/(loss)	-	3	(3)	-	(1)	(17)	(18)
Amortisation of bed licenses	(17)	-	-	-	-	-	(17)
Other non-underlying items³	-	(10)	-	-	-	-	(10)
Total non-underlying items							(92)
Consolidated profit before taxation expense							286

1.	Amounts have been restated for the adoption of IFRS 17 (refer to Note 1.4.1) and to reflect the revised definition of underlying profit.
2.	Adjustments include impacts of applying IAS 29.
3.	Europe and Latin America segment includes £10m restructuring costs.

Consolidated underlying profit before taxation expense	257	66	67	20	(32)	-	378
Impact of applying IFRS 17	(118)	15	8	10	2	-	(83)
Net gains on investment property	(12)	-	-	-	-	-	(12)
Investment returns	4	(24)	(1)	-	18	-	(3)
Underlying profit by reportable segments as previously reported	131	57	74	30	(12)	-	280

	Bupa Asia Pacific	Europe and Latin America	Bupa Global and UK	Other businesses	Group Functions	Adjustments²	Total
For year ended 31 December 2022 (restated)¹	£m	£m	£m	£m	£m	£m	£m
Revenues
Insurance revenue	4,431	2,926	2,647	-	-	29	10,033
Inter-Market Unit revenue	(57)	-	57	-	-	-	-
Insurance revenue for reportable segments	4,374	2,926	2,704	-	-	29	10,033
Care, health and other customer contract revenue	1,282	1,550	1,135	-	-	-	3,967
Other revenue¹	60	11	3	7	-	-	81
Non-insurance revenue for reportable segments	1,342	1,561	1,138	7	-	-	4,048
Total revenue reportable for segments	5,716	4,487	3,842	7	-	29	14,081
Segmental result
Underlying profit for reportable segments¹	424	300	47	49	(6)	-	814
Borrowing costs	-	-	-	-	(66)	-	(66)
Consolidated underlying profit before taxation expense	424	300	47	49	(72)	-	748
Non-underlying items:
Impairments of intangible assets and goodwill arising on business combinations³	(108)	(161)	(619)	-	-	-	(888)
Short-term fluctuation on investment returns	6	-	(34)	-	6	-	(22)
Net gain/(loss) on disposal of businesses and transaction costs on business combinations	4	(3)	(1)	(4)	-	-	(4)
Net property revaluation (loss)/gain	(6)	5	(32)	-	-	-	(33)
Realised and unrealised FX gain/(loss)	-	5	8	-	1	(29)	(15)
Amortisation of bed licenses	(34)	-	-	-	-	-	(34)
Other non-underlying items⁴	(4)	(16)	(1)	-	-	-	(21)
Total non-underlying items							(1,017)
Consolidated profit before taxation expense							(269)

1.	Amounts have been restated for the adoption of IFRS 17 (refer to Note 1.4.1) and to reflect the revised definition of underlying profit.
2.	Adjustments include impacts of applying IAS 29.
3.	Includes impairments recognised within Bupa Asia Pacific (Bupa Villages and Aged Care Australia), Europe and Latin America (Bupa Chile) and Bupa Global and UK (Bupa Dental Care UK and Bupa Care Services).
4.	Europe and Latin America segment includes £16m restructuring costs.

Consolidated underlying profit before taxation expense	424	300	47	49	(72)	-	748
Impact of applying IFRS 17	(59)	11	6	9	(13)	-	(46)
Net gains on investment property	(28)	-	-	-	-	-	(28)
Investment returns	(6)	(52)	(14)	-	91	-	19
Underlying profit by reportable segments as previously reported	331	259	39	58	6	-	693

3   Non-insurance revenue

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

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

	Care, health and other customer contract revenue	Other revenue  restated¹	Total non-insurance revenues  restated¹
For six months ended 30 June 2022	£m	£m	£m
Bupa Health Insurance	2	2	4
Bupa Health Services	306	-	306
Bupa Villages and Aged Care Australia	153	19	172
Bupa Villages and Aged Care New Zealand	72	8	80
Bupa Hong Kong	87	1	88
Bupa Asia Pacific	620	30	650
Sanitas Seguros	5	1	6
Sanitas Dental	62	2	64
Sanitas Hospitales and New Services	94	1	95
Sanitas Mayores	70	-	70
LUX MED	266	-	266
Bupa Acıbadem Sigorta¹	-	2	2
Bupa Chile	198	-	198
Care Plus	2	-	2
Bupa Mexico	5	-	5
Bupa Global Latin America	7	-	7
Europe and Latin America	709	6	715
Bupa UK Insurance¹	10	-	10
Bupa Dental Care UK	243	-	243
Bupa Care Services	212	-	212
Bupa Health Services	99	1	100
Bupa Global and UK	564	1	565
Other	-	3	3
Other businesses	-	3	3
Consolidated non-insurance revenues	1,893	40	1,933

1.	Amounts have been restated for the adoption of IFRS 17. Refer to Note 1.4.1.

	Care, health and other customer contract revenue	Other revenue  restated¹	Total non-insurance revenues  restated¹
For year ended 31 December 2022	£m	£m	£m
Bupa Health Insurance	7	2	9
Bupa Health Services	614	1	615
Bupa Villages and Aged Care Australia	318	37	355
Bupa Villages and Aged Care New Zealand	148	17	165
Bupa Hong Kong	195	3	198
Bupa Asia Pacific	1,282	60	1,342
Sanitas Seguros¹	10	2	12
Sanitas Dental	119	4	123
Sanitas Hospitales and New Services	305	1	306
Sanitas Mayores	145	-	145
LUX MED	568	-	568
Bupa Acıbadem Sigorta¹	-	2	2
Bupa Chile	388	1	389
Care Plus	4	-	4
Bupa Mexico	11	-	11
Bupa Global Latin America	-	1	1
Europe and Latin America	1,550	11	1,561
Bupa UK Insurance¹	21	2	23
Bupa Dental Care UK	487	-	487
Bupa Care Services	431	-	431
Bupa Health Services	196	1	197
Bupa Global and UK	1,135	3	1,138
Other	-	7	7
Other businesses	-	7	7
Consolidated non-insurance revenues	3,967	81	4,048

1.	Amounts have been restated for the adoption of IFRS 17. Refer to Note 1.4.1.

 

4   Other income and charges

	For six months ended 30 June 2023	For six months ended 30 June 2022  restated¹	For year ended 31 December 2022  restated¹
	£m	£m	£m
Net loss on disposal and restructuring of businesses	(2)	(2)	(4)
Loss on revaluation of property	-	(1)	(33)
Net gain/(loss) on disposal of property, plant and equipment	3	-	(2)
Surplus on fair value of investment property¹	12	12	28
Total other income and charges	13	9	(11)

1.	Surplus on fair value of investment property has been reclassified from financial income and expense (see Note 5).

5   Financial income and expense

Financial income

	For six months ended 30 June 2023	For six months ended 30 June 2022  restated¹	For year ended 31 December 2022  restated¹
	£m	£m	£m
Interest income:
Investments at fair value through profit or loss	25	26	61
Investments at fair value through other comprehensive income	5	1	1
Investments at amortised cost	86	17	72
Net realised gain/(loss):
Net realised gain/(loss) on investments at fair value through profit or loss	7	8	(13)
Net realised gain on financial investments at fair value through other comprehensive income	-	1	-
Net movement in fair value:
Investments at fair value through profit or loss	19	(46)	(5)
Net foreign exchange translation gain	16	15	42
Total financial income	158	22	158

1.	Surplus on fair value of investment property has been reclassified and is now presented within other income and charges (see Note 4).

Financial expense

	For six months ended 30 June 2023	For six months ended 30 June 2022	For year ended 31 December 2022¹
	£m	£m	£m
Interest expense on financial liabilities at amortised cost	54	42	99
Finance charges in respect of leases and restoration provisions	25	23	46
Other financial expense¹	12	17	29
Total financial expense	91	82	174

1.	For year ended 31 December 2022, other financial expense includes £6m loss recognised following the early redemption of £47m of inflation-linked senior unsecured bonds, originally due to mature on 30 June 2033.

Other financial expenses for the six months ended 30 June 2023 include £10m (HY 2022: £10m; FY 2022: £20m) of imputed financial expenses in relation to interest-free refundable accommodation deposits received by the Group in respect of payment for aged care units in Bupa Villages and Aged Care Australia.

6   Taxation expense

The Group's effective taxation rate for the period was 22% (HY 2022 (restated): 33%; FY 2022 (restated): -48%), which is broadly in line with the current UK corporation taxation rate of 23.5%.

The Group operates in the UK where new tax legislation to implement a global minimum top-up tax has been substantively enacted. Since the newly enacted tax legislation in the UK is effective only from 1 January 2024, there is no current tax impact in the period (HY 2022: £nil).  The Group has applied a temporary mandatory relief from deferred tax accounting for the impacts of the top-up tax, and instead accounts for it as a current tax when it is incurred. If the top-up tax had applied in 2023, the impact would not have been material for the Group.

7   Goodwill and intangible assets

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

	Goodwill	Computer software	Brands/trademarks	Customer relationships	Other¹	Total
At 31 December 2022	£m	£m	£m	£m	£m	£m
Net book value at beginning of period	2,466	291	134	482	145	3,518
Assets arising on business combinations	14	2	3	2	-	21
Additions	-	111	-	-	-	111
Disposals	(2)	(1)	-	-	-	(3)
Amortisation for period	-	(72)	(8)	(53)	(42)	(175)
Impairment loss	(609)	(6)	(22)	(255)	(2)	(894)
Other	-	(1)	-	-	-	(1)
Foreign exchange	112	15	13	11	12	163
Net book value at end of period	1,981	339	120	187	113	2,740

	Goodwill	Computer software	Brands/trademarks	Customer relationships	Other¹	Total
At 30 June 2022	£m	£m	£m	£m	£m	£m
Net book value at beginning of period	2,466	291	134	482	145	3,518
Assets arising on business combinations	3	2	-	1	-	6
Additions	-	41	-	-	-	41
Disposals	(1)	(1)	-	-	-	(2)
Amortisation for period	-	(36)	(4)	(27)	(21)	(88)
Foreign exchange	98	10	5	8	10	131
Net book value at end of period	2,566	307	135	464	134	3,606

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

Goodwill and intangible assets of £2,633m (HY 2022: £3,606m; FY 2022: £2,740m) include £396m (HY 2022: £733m; FY 2022: £420m) attributable to other intangible assets arising on business combinations, comprising brands/trademarks, customer relationships and other in the above table.

Computer software assets with a net book value of £343m (HY 2022: £307m; FY 2022: £339m) include £255m (HY 2022: £219m; FY 2022: £245m) attributable to capitalised internal development costs. The cost attributable to these assets is £551m (HY 2022: £477m; FY 2022: £526m). £47m of costs (HY 2022: £36m; FY 2022: £93m) were capitalised in the period.

Goodwill by CGU is as follows:

	At 30 June 2023	At 31 December 2022	At 30 June 2022
	£m	£m	£m
Bupa Asia Pacific
Bupa Australia Health Insurance	801	863	867
Bupa Health Services Australia	278	299	303
Bupa Villages and Aged Care Australia	-	-	104
Hong Kong	122	129	127
Europe and Latin America
Bupa Chile	-	-	135
LUX MED	271	265	249
Sanitas Seguros	53	49	47
Sanitas Mayores	21	22	21
Bupa Acıbadem Sigorta	44	53	50
Care Plus	30	29	29
Other	11	10	6
Bupa Global and UK
Bupa Care Services	-	-	90
Bupa Dental Care UK	191	191	467
Bupa Global	68	68	68
Other	4	3	3
Total	1,894	1,981	2,566

Impairment testing of goodwill and indefinite life intangible assets

Goodwill and intangible assets with an indefinite useful life are tested at least annually for impairment in accordance with IAS 36 Impairment of Assets and IAS 38 Intangible Assets. As at 30 June 2023, all CGUs and intangible assets were reviewed for indicators of impairment. Where impairment indicators were identified an impairment test was carried out by comparing the net carrying value with the recoverable amount, using value in use calculations and based on the latest cash flow forecasts for CGUs as at 30 June 2023. Following the impairment recognised at 31 December 2022 in Bupa Dental Care UK, a full impairment test has been performed for the Bupa Dental Care UK CGU.

Key judgements in performing this testing are the assumptions underlying the five-year cash flow forecasts of the businesses. For Bupa Dental Care UK, the cash flows are driven by number of customers, available clinician hours, fee rates and operating expenses. The tests have not indicated that an impairment of goodwill is required, with the headroom increasing in the period. Sensitivities have been provided below showing the impact of a reasonably probable change to the discount rate, terminal growth rate or cash flows, none of which would give rise to an impairment.

	Headroom	Discount rate	Terminal growth rate	Reduction in headroom from 0.5% increase in discount rate	Reduction in headroom from 0.5% reduction in terminal growth rate	Reduction in headroom from 10% reduction in cash flows
	£m	%	%	£m	£m	£m
Bupa Dental Care UK	33	10.3	2.1	14	18	10

 

8   Property, plant and equipment

	At 30 June 2023	At 31 December 2022	At 30 June 2022
	£m	£m	£m
Net book value at beginning of period	3,691	3,793	3,793
Assets arising on business combinations	1	9	4
Additions	145	262	100
Transfer to assets held for sale	(2)	(35)	(14)
Disposals	(4)	(12)	(9)
Revaluations	-	(77)	10
Remeasurements	35	58	24
Depreciation charge for the period	(157)	(329)	(163)
Impairment loss	-	(124)	-
Other	-	1	-
Foreign exchange	(96)	145	87
Net book value at end of period	3,613	3,691	3,832

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

Freehold properties are initially measured at cost and subsequently at revalued amount less accumulated depreciation and impairment losses. These properties are subject to external valuations at least every three years. In years where a full external valuation is not completed, a directors' valuation is conducted based on significant underlying assumptions such as cash flows and other market variables. An internal review of the significant underlying assumptions is conducted during interim periods. Consideration is also given to whether there are any factors which indicate a full out-of-cycle external revaluation is required. Care homes, clinics and hospital freehold property valuations are either determined based on a capitalisation of earnings approach where each facility's normalised earnings are calculated based on what a reasonably efficient operator could be expected to achieve and is divided by an appropriate capitalisation rate to determine a value in use, or based on discounted future cash flow projections where the discount rate is determined according to the time value of money, the level of risk of the industry and the corresponding premium risk. All other properties are valued by external valuers, based on observable market values of similar properties.

No external valuations were performed as at 30 June 2023. An internal review of the significant underlying assumptions underpinning the property valuations as at 30 June 2023 resulted in no uplifts or write-downs in respect of owned property (HY 2022: uplifts of £10m, FY 2022: write-downs of £77m).

Impairment testing of tangible assets

Right-of-use assets have been reviewed for indicators of impairment as at 30 June 2023. Where impairment indicators were identified an impairment test was carried out by comparing the net carrying value with the recoverable amount, using the higher of fair value or the value in use based on the latest cash flow forecasts for CGUs as at 30 June 2023.

No impairments have been identified as at 30 June 2023 (HY 2022: £nil; FY 2022: £124m).

 

9   Investment property

	At 30 June 2023	At 31 December 2022	At 30 June 2022
	£m	£m	£m
At beginning of period	750	666	666
Additions	13	29	12
Disposals	-	(1)	(1)
Increase in fair value	12	29	12
Foreign exchange	(58)	27	11
At end of period	717	750	700

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

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

The carrying value of investment properties primarily consists of the Group's portfolio of retirement villages in Australia and New Zealand of £704m (HY 2022: £689m, FY 2022: £736m). At 30 June 2023 the properties were valued by management using internally prepared discounted cash flow projections, supported by the terms of any existing lease and other contracts. Discount rates are used to reflect current market assessments of the uncertainty in the amount or timing of the cash flows.

10   Post-employment benefits

The Group operates several defined benefit and defined contribution pension schemes for the benefit of employees and Directors.

The defined benefit pension schemes provide benefits based on final pensionable salary. The Group's net obligation in respect of the defined benefit pension is calculated separately for each scheme and represents the present value of the defined benefit obligation less the fair value of any scheme assets. The discount rate used is the yield at the reporting date on high-quality corporate bonds denominated in the currency in which the benefit will be paid and taking account of the maturities of the defined benefit obligations. When the calculation results in a benefit to the Group, the recognised asset is limited to the present value of any future refunds from the scheme or reductions in future contributions to the scheme.

Amount recognised in the Condensed Consolidated Income Statement

The total amount charged to the Condensed Consolidated Income Statement amounted to £2m (HY 2022 and FY 2022: £nil).

Amount recognised directly in other comprehensive income

The amounts credited directly to equity are:

	For six months ended 30 June 2023	For six months ended 30 June 2022	For year ended 31 December 2022
	£m	£m	£m
Actual return less expected return on assets	-	-	23
Gain arising from changes to financial assumptions	-	-	(26)
Loss arising from changes to experience assumptions	-	-	1
Gain arising from changes to demographic assumptions	-	-	(1)
Total remeasurement gains credited directly to equity	-	-	(3)

Assets and liabilities of schemes

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

	At 30 June 2023	At 31 December 2022	At 30 June 2022
	£m	£m	£m
Present value of funded obligations	(54)	(54)	(82)
Fair value of scheme assets	49	49	75
Net assets of funded schemes	(5)	(5)	(7)
Present value of unfunded obligations	(2)	-	-
Net recognised liabilities	(7)	(5)	(7)
Represented on the Condensed Consolidated Statement of Financial Position:
Net liabilities	(9)	(7)	(9)
Net assets	2	2	2
Net recognised liabilities	(7)	(5)	(7)

11   Restricted assets

	At 30 June 2023	At 31 December 2022	At 30 June 2022
	£m	£m	£m
Non-current restricted assets	41	40	46
Current restricted assets	85	79	83
Total restricted assets	126	119	129

Restricted assets are amounts held in respect of specific obligations and potential liabilities and may be used only to discharge those obligations and potential liabilities if and when they crystallise. The non-current restricted assets balance of £41m (HY 2022: £46m; FY 2022: £40m) consists of cash deposits held to secure a charge over certain unfunded pension scheme obligations (held in the Parent company). Included in current restricted assets is £82m (HY 2022: £77m; FY 2022: £74m) in respect of claims funds held on behalf of corporate customers.

12   Financial investments

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

Classification

All financial investments are initially recognised at fair value, which includes transaction costs for financial investments not classified at fair value through profit or loss. Financial investments are recorded using trade date accounting at initial recognition.

Financial investments are derecognised when the rights to receive cash flows from the financial investments have expired or where the Group has transferred substantially all risks and rewards of ownership.

The Group has classified its financial investments into the following categories: at fair value through profit or loss, at fair value through other comprehensive income (FVOCI) and at amortised cost.

Impairment

Under IFRS 9, impairment provisions for expected credit losses (ECL) are recognised for financial investments measured at amortised cost and FVOCI. An allowance for either a 12-month or lifetime ECL is required, depending on whether there has been a significant increase in credit risk since initial recognition. For trade receivables, lifetime ECL is always applied. An assumption can be made that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date (e.g. it is investment grade). The Group applies a 12-month ECL allowance to all assets other than trade receivables, as no significant increases in credit risk since initial recognition have been identified.

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

Financial investments are analysed as follows:

	At 30 June 2023		At 31 December 2022		At 30 June 2022
	Carrying value	Fair value	Carrying value	Fair value	Carrying value	Fair value
	£m	£m	£m	£m	£m	£m
Fair value through profit or loss
Corporate debt securities and secured loans	308	308	301	301	307	307
Government debt securities	40	40	41	41	45	45
Pooled investment funds	482	482	459	459	463	463
Deposits with credit institutions	29	29	4	4	7	7
Other loans	6	6	7	7	7	7
Equities	30	30	32	32	14	14
Fair value through other comprehensive income
Corporate debt securities and secured loans	33	33	41	41	49	49
Government debt securities	44	44	19	19	30	30
Amortised cost
Corporate debt securities and secured loans	1,234	1,232	1,114	1,110	1,130	1,127
Government debt securities	496	497	468	468	342	344
Deposits with credit institutions	1,305	1,305	1,230	1,230	1,342	1,339
Total financial investments	4,007	4,006	3,716	3,712	3,736	3,732
Non-current	821	822	756	752	845	842
Current	3,186	3,184	2,960	2,960	2,891	2,890

Fair value of financial investments

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

The fair values of quoted investments in active markets are based on current bid prices. The fair values of unlisted securities and quoted investments for which there is no active market are established by using valuation techniques supported by market transactions and observable market data provided by independent third parties. These may include reference to the current fair value of other investments that are substantially the same and discounted cash flow analysis.

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

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

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

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

	Level 1	Level 2	Level 3	Total
	£m	£m	£m	£m
At 31 December 2022
Fair value through profit or loss
Corporate debt securities and secured loans	21	279	1	301
Government debt securities	22	19	-	41
Pooled investment funds	89	347	23	459
Deposits with credit institutions	4	-	-	4
Other loans	-	-	7	7
Equities	-	-	32	32
Fair value through other comprehensive income
Corporate debt securities and secured loans	38	3	-	41
Government debt securities	19	-	-	19
Amortised cost
Corporate debt securities and secured loans	488	622	-	1,110
Government debt securities	290	178	-	468
Deposits with credit institutions	-	1,230	-	1,230
Total financial investments	971	2,678	63	3,712

	Level 1	Level 2	Level 3	Total
	£m	£m	£m	£m
At 30 June 2022
Fair value through profit or loss
Corporate debt securities and secured loans	26	280	1	307
Government debt securities	27	18	-	45
Pooled investment funds	115	326	22	463
Deposits with credit institutions	7	-	-	7
Other loans	-	-	7	7
Equities	-	-	14	14
Fair value through other comprehensive income
Corporate debt securities and secured loans	45	4	-	49
Government debt securities	30	-	-	30
Amortised cost
Corporate debt securities and secured loans	527	600	-	1,127
Government debt securities	171	173	-	344
Deposits with credit institutions	-	1,339	-	1,339
Total financial investments	948	2,740	44	3,732

Transfers between fair value hierarchy levels

The Group's policy is to determine whether transfers have occurred between fair value hierarchy levels at the end of a reporting period. Classification is reassessed based on the lowest level input that is significant to the fair value measurement as a whole.

There were no transfers between fair value hierarchy levels in the period (HY 2022: £nil; FY 2022: £nil).

The Group currently holds Level 3 financial investments totalling £58m (HY 2022: £44m; FY 2022: £63m). The majority of Level 3 investments are unlisted equities and pooled investment funds valued at recent subscription values and conversion prices, which are considered to be unobservable inputs. Changes to the valuation assumptions which are reasonably possible could result in a change in fair value of plus or minus £3m.

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

	At 30 June 2023	At 31 December 2022	At 30 June 2022
	£m	£m	£m
Balance at beginning of period	63	34	34
Additions	-	4	3
Disposals	-	-	(1)
Net (decrease)/increase in fair value¹	(2)	24	7
Foreign exchange	(3)	1	1
Balance at end of period	58	63	44

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

13   Insurance contracts

The Group applies the premium allocation approach (PAA) for the measurement for the majority of insurance contracts. The majority of the Group's contracts automatically qualify as the coverage period of each contract in the group is one year or less. For the remaining contracts it is reasonably expected that using the PAA would produce a measurement of the liability for remaining coverage (LFRC) that would not differ materially from the one that would be produced applying the general measurement model (GMM). The Group has one legacy portfolio with a contract boundary of greater than one year where the contracts are onerous and a GMM valuation has been used.

On initial recognition of each group of insurance contracts, the carrying amount of the LFRC is measured at the premiums received less any directly attributable acquisition costs deferred. Revenue is released on a pattern of time basis over the coverage period. The Groups default policy is not to adjust the LFRC to reflect the time value of money and the effect of financial risk, as the Group expects on initial recognition of each group of contracts that the time between providing each part of the services and the related premium due date is no more than one year. However, businesses can seek approval to apply discounting in exceptional circumstances. Acquisition costs are expensed as they are incurred for all contracts with a coverage period of one year or less.

The liability for incurred claims (LFIC) represents the estimated liability arising from claims episodes in current and preceding financial years which have not yet given rise to claims paid. A claims episode is an insured medical service that the Group has an obligation to fund which could be consultation fees, diagnostic investigations, hospitalisation or treatment costs. The liability includes an allowance for claims management and handling expenses.

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

The LFIC across the group is set in line with Bupa's Claims Reserving standards, at a level to achieve an appropriate probability of sufficiency and is estimated based on current information. The ultimate liability may vary as a result of subsequent information and events. A risk adjustment is added that reflects the compensation the Group requires for bearing the uncertainty about the amount and timing of the cash flows from non-financial risk as the Group fulfils insurance contracts. The Group has estimated the risk adjustment using a confidence level approach at the 85th percentile (HY 2022 and FY 2022: 85th percentile).

Bupa Acıbadem Sigorta has applied discounting to both the LFRC and LFIC due to the high interest rate and high inflation environment in Türkiye and Bupa Global has applied discounting to LFIC as a proportion of claims are settled over a period that is greater than one year. In addition, the LFRC for the legacy individual health policies in Brazil has been discounted due to the long-term nature of these contracts.

In circumstances where a return of premiums is due to policyholders, a provision is established within the LFIC. A provision for the return of premiums was established in 2020 in respect of Bupa Insurance Limited following the commitment to pass back to eligible customers any exceptional financial benefits experienced by the UK PMI business that ultimately arose as a result of the COVID-19 pandemic. As a result of a step-change in claims, the estimate of deferred claims rebound has been reassessed and has resulted in the return of premium provision being released in full during the first half of 2023  such that there is no provision remaining at 30 June 2023 (FY 2022: £59m; HY 2022: £60m).

The LFIC also includes a provision of £175m (HY 2022: £86m; FY 2022: £87m) for cash payments to Australian health insurance customers under the COVID-19 customer support programme. A provision is recognised at the point the Group formally announces the payment and insurance revenue recognised within the Condensed Consolidated Income Statement are reduced accordingly. The provision is subsequently utilised on payment to the eligible customers. As the cash payments reflect a distinct promise associated with the return of COVID-19 claims savings to customers, the provision is reflected as a non-distinct investment component. A deferred tax asset of £55m has been recognised in relation to the HY 2023 provision.

13.1   Insurance contracts roll forward

	Liability for remaining coverage		Liability for incurred claims		Total
For six months ended 30 June 2023	Excluding loss component £m	Loss component £m	Estimates of present value of future cash flows £m	Risk adjustment £m	£m
Insurance contract liabilities at 1 January	1,081	100	1,176	21	2,378
Insurance revenue	(5,234)	-	-	-	(5,234)
Insurance service expenses	-	(26)	5,074	3	5,051
Incurred claims and other expenses	-	-	4,919	15	4,934
Losses on onerous contracts and reversals of those losses	-	(26)	-	-	(26)
Changes to liabilities for incurred claims relating to past service	-	-	155	(12)	143
Insurance service result	(5,234)	(26)	5,074	3	(183)
Foreign exchange	(36)	(3)	(59)	(1)	(99)
Finance expense from insurance contracts issued	-	6	2	-	8
Total changes in statement of comprehensive income	(5,270)	(23)	5,017	2	(274)
Other movements	2	-	6	-	8
Non-distinct investment component	(175)	-	175	-	-
Cash flows
Premiums received	5,737	1	-	-	5,738
Claims and other expenses paid	-	-	(4,934)	-	(4,934)
Total cash flows	5,737	1	(4,934)	-	804
Insurance contract liabilities at 30 June	1,375	78	1,440	23	2,916

Included within the loss component is £49m (HY 2022: £45m; FY 2022: £45m) related to insurance contracts measured on a GMM basis.

	Liability for remaining coverage		Liability for incurred claims		Total
For year ended 31 December 2022	Excluding loss component £m	Loss component £m	Estimates of present value of future cash flows £m	Risk adjustment £m	£m
Insurance contract liabilities at 1 January	985	94	1,098	14	2,191
Insurance revenue	(10,033)	-	-	-	(10,033)
Insurance service expenses	-	8	9,326	5	9,339
Incurred claims and other expenses	-	-	9,302	-	9,302
Losses on onerous contracts and reversals of those losses	-	8	-	-	8
Changes to liabilities for incurred claims relating to past service	-	-	24	5	29
Insurance service result	(10,033)	8	9,326	5	(694)
Foreign exchange	20	10	62	2	94
Finance income from insurance contracts issued	-	(16)	-	-	(16)
Total changes in statement of comprehensive income	(10,013)	2	9,388	7	(616)
Other movements	-	-	(38)	-	(38)
Non-distinct investment component	(87)	-	87	-	-
Cash flows
Premiums received	10,196	4	-	-	10,200
Claims and other expenses paid	-	-	(9,359)	-	(9,359)
Total cash flows	10,196	4	(9,359)	-	841
Insurance contract liabilities at 31 December	1,081	100	1,176	21	2,378

	Liability for remaining coverage		Liability for incurred claims		Total
For six months ended 30 June 2022	Excluding loss component £m	Loss component £m	Estimates of present value of future cash flows £m	Risk adjustment £m	£m
Insurance contract liabilities at 1 January	985	94	1,098	14	2,191
Insurance revenue	(4,809)	-	-	-	(4,809)
Insurance service expenses	-	4	4,474	2	4,480
Incurred claims and other expenses	-	-	4,368	3	4,371
Losses on onerous contracts and reversals of those losses	-	4	-	-	4
Changes to liabilities for incurred claims relating to past service	-	-	106	(1)	105
Insurance service result	(4,809)	4	4,474	2	(329)
Foreign exchange	46	10	44	-	100
Finance income from insurance contracts issued	-	(22)	-	-	(22)
Total changes in statement of comprehensive income	(4,763)	(8)	4,518	2	(251)
Other movements	-	-	(38)	-	(38)
Non-distinct investment component	(86)	-	86	-	-
Cash flows
Premiums received	5,117	3	-	-	5,120
Claims and other expenses paid	-	-	(4,388)	-	(4,388)
Total cash flows	5,117	3	(4,388)	-	732
Insurance contract liabilities at 30 June	1,253	89	1,276	16	2,634

13.2   Reinsurance contracts roll forward

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

A risk adjustment is estimated on the amount recoverable on incurred claims using a confidence level approach at the 85th percentile (HY 2022 and FY 2022: 85th percentile). As this totals less than £1m, this has not been separately presented.

For year ended 31 December 2022	Asset for remaining coverage £m	Amount recoverable on incurred claims £m	Total £m
Reinsurance contract assets at 1 January	(17)	35	18
Allocation of reinsurance premiums	(116)	-	(116)
Amounts recoverable from reinsurers for incurred claims:
Amounts recoverable for incurred claims and other expenses	-	94	94
Net expense from reinsurance contracts held	(116)	94	(22)
Foreign exchange	2	(1)	1
Cash flows
Premiums paid	113	-	113
Recoveries from reinsurance	-	(89)	(89)
Total cash flows	113	(89)	24
Reinsurance contract assets at 31 December	(18)	39	21

For six months ended 30 June 2022	Asset for remaining coverage £m	Amount recoverable on incurred claims £m	Total £m
Reinsurance contract assets at 1 January	(17)	35	18
Allocation of reinsurance premiums	(57)	-	(57)
Amounts recoverable from reinsurers for incurred claims:
Amounts recoverable for incurred claims and other expenses	-	43	43
Net expense from reinsurance contracts held	(57)	43	(14)
Foreign exchange	-	1	1
Cash flows
Premiums paid	44	-	44
Recoveries from reinsurance	-	(35)	(35)
Total cash flows	44	(35)	9
Reinsurance contract assets at 30 June	(30)	44	14

14   Assets and liabilities held for sale

	At 30 June 2023	At 31 December 2022	At 30 June 2022
	£m	£m	£m
Assets held for sale
Property, plant and equipment	22	31	21
Investment property	1	1	1
Inventories	1	-	-
Total assets held for sale	24	32	22
Liabilities associated with assets held for sale
Provisions for liabilities and charges	-	(1)	(1)
Total liabilities held for sale	-	(1)	(1)
Net assets held for sale	24	31	21

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

Net assets held for sale as at 31 December 2022 predominantly comprised a number of care homes within Bupa UK Care Services, Bupa Villages and Aged Care Australia and Bupa Villages and Aged Care New Zealand and an office within Care Plus in Brazil. As at 30 June 2022, net assets held for sale comprised a number of care homes within Bupa Villages and Aged Care Australia and Bupa Villages and Aged Care New Zealand and an office within Care Plus in Brazil.

15   Cash and cash equivalents

	At 30 June 2023	At 31 December 2022	At 30 June 2022
	£m	£m	£m
Cash at bank and in hand	1,202	1,141	1,256
Short-term deposits	346	262	297
Total cash and cash equivalents	1,548	1,403	1,553

Cash and cash equivalents comprise cash balances, call deposits and other short-term highly liquid investments (including money market funds) with original maturities of three months or less, which are subject to an insignificant risk of change in value.

Bank overdrafts of £3m (HY 2022: £1m; FY 2022: £2m) that are repayable on demand are reported within other interest-bearing liabilities (Note 16) in the Condensed Consolidated Statement of Financial Position. Demand deposits with restrictions on use set by a third party that fundamentally change their nature are reported within restricted assets in the Condensed Consolidated Statement of Financial Position. Both of these are considered components of cash and cash equivalents for the purpose of the Condensed Consolidated Statement of Cash Flows.

16   Borrowings

	At 30 June 2023	At 31 December 2022	At 30 June 2022
	£m	£m	£m
Subordinated liabilities
Subordinated unguaranteed bonds	746	998	997
Total subordinated liabilities	746	998	997
Other interest-bearing liabilities
Senior unsecured bonds	599	600	599
Fair value adjustment in respect of hedged interest rate risk	(63)	(60)	(41)
Bank loans and overdrafts	415	108	266
Total other interest-bearing liabilities	951	648	824
Total borrowings	1,697	1,646	1,821
Non-current	985	1,287	1,305
Current	712	359	516

Subordinated unguaranteed bonds

On 25 April 2023, the Company redeemed the outstanding maturing £250m of the £500m 5% fixed rate subordinated notes.

Other interest-bearing liabilities

The Group maintains a £900m revolving credit facility in the name of the Company, which matures in December 2027, with a one year extension option. The facility was drawn down by £380m as at 30 June 2023 (HY 2022: £230m; FY 2022: £70m). Bank loans and overdrafts bear interest at commercial rates linked to SONIA for sterling or equivalent for other currencies.

Fair value of financial liabilities

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

Financial liabilities are categorised into a three-level hierarchy. A description of the different levels is detailed in Note 12.

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

	At 30 June 2023			At 31 December 2022			At 30 June 2022
	Level 1	Level 2	Total	Level 1	Level 2	Total	Level 1	Level 2	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Subordinated liabilities	632	-	632	906	-	906	942	-	942
Senior unsecured bonds	540	-	540	545	-	545	565	-	565
Bank loans and overdrafts	-	415	415	2	106	108	-	266	266
Total fair value	1,172	415	1,587	1,453	106	1,559	1,507	266	1,773

The Group does not have any Level 3 financial liabilities.

17   Restricted Tier 1 (RT1) notes

On 24 September 2021, the Company issued £300m of RT1 notes with a fixed coupon of 4.000% paid semi-annually in arrears. Transaction costs of £3m were recognised in respect of the issue. The total coupon paid during the period was £6m (HY 2022: £6m; FY 2022: £12m).

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

18   Business combinations and disposals

In June 2023, the Group acquired the insurance and medical business of Asefa, S.A. Seguros y Reaseguros, an insurance company specialising in the construction industry that operates in Spain, for a consideration of £24m. Intangible assets consisting of customer relationships, distribution networks and computer software totalling £26m, other net assets of £(7)m and resulting goodwill of £5m were recognised on acquisition.

During the period, the Group completed the sale of care homes and retirement village in Bupa Villages and Aged Care New Zealand for a consideration of £6m and the sale of a care home within Bupa UK Care Services for a consideration of £3m. Other minor disposals in the period included dental clinics in Australia and closure of clinics in China.

There was a settlement of deferred and contingent consideration of £1m during the period in respect of prior period acquisitions.

19   Commitments and contingencies

Capital commitments

Capital expenditure for the Group contracted at 30 June 2023 but for which no provision has been made in the Condensed Consolidated Financial Statements amounted to £32m (HY 2022: £54m; FY 2022: £40m). Of this, £31m (HY 2022: £53m; FY 2022: £40m) relates to aged care facility and retirement village project commitments in Australia and New Zealand and care homes in the UK; specifically £23m (HY 2022: £27m; FY 2022: £21m) in relation to property, plant and equipment and £8m (HY 2022: £26m; FY 2022: £19m) in relation to investment property.

Contingent assets

The Group currently has no contingent assets.

Contingent liabilities

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

As disclosed in the 2022 Annual Report and Accounts, the negative impact of judicial and regulatory action on the Isapre insurance industry in Chile continues. The method of implementation of the statutory risk factor table following the Supreme Court decision of December 2022 remains unclear. The deadline for such implementation has been extended from May 2023 to November 2023 and may be extended further. The Chilean government proposed a new draft law to address the uncertainty in May. This is going through the legislative process and is subject to debate, amendment and other material changes, and even rejection. As part of this process, the local regulator, the Superintendent of Health (SIS), presented to the Senate's Health Committee. As part of this presentation, the SIS shared a draft methodology to illustrate the application of the new draft law. In summary terms, for the period of May 2020 to November 2022 this showed a negative financial impact of the draft law on the Isapre sector of CLP 929bn (£913m) and on Isapre Cruz Blanca of CLP 233bn (£229m). The value calculated using this basis will increase as time passes. This calculation was shared for illustrative purposes only, is not binding and may be revised. The topic of the timing of payments (if due) was not discussed. The current status of the new draft law is that it is being discussed by the Senate's Health Committee.

Given the continuing uncertainty, Isapre Cruz Blanca consider there to be a wide range of possible outcomes and resultant future cash outflows and is unable to reliably estimate the value of any such future retrospective payments, therefore, no IFRS provision has been recognised as at 30 June 2023.

There continues to be a broad range of possible outcomes, however, in contrast to the requirements of IFRS, under Solvency II the Group is required to include a value for contingent liabilities, even if the amount of the obligation cannot be measured with sufficient reliability. As at 30 June 2023, the Group included an allowance of £160m (FY 2022: £100m) for this contingent liability for retrospective payments within the Solvency II regulatory balance sheet. 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 this ruling would be liabilities for Isapre Cruz Blanca.

In addition to the above Supreme Court decision, the regulator-approved Garantias Explicitas en Salud (GES) pricing increases, in place since October 2022, are subject to judicialisation. The annualised impact to revenue of these price increases is approximately £90m. A ruling is expected later in the year which could lead to liabilities for retrospective payments. The situation is uncertain and any potential financial impact is contingent on the future outcome of the judicialisation. Therefore, no IFRS provision has been recognised as at 30 June 2023.

Bupa Finance plc

Statement of Directors' responsibilities for six months ended 30 June 2023

We confirm that to the best of our knowledge:

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

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

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

The Directors of Bupa Finance plc are listed in the Directors' Report for the year ended 31 December 2022. There have been no changes in Directors since the publication of the Company's Annual Report and Accounts for the year ended 31 December 2022.

By order of the Board

James Lenton                                                                                        Clare Binmore

Director                                                                                                  Director

2 August 2023

Independent review report to Bupa Finance plc

Report on the condensed consolidated interim financial statements

 

Our conclusion

We have reviewed Bupa Finance plc's condensed consolidated interim financial statements (the "interim financial statements") in the Condensed Consolidated Half Year Financial Statements of Bupa Finance plc for the 6 month period ended 30 June 2023 (the "period").

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

The interim financial statements comprise:

•       the Condensed Consolidated Statement of Financial Position as at 30 June 2023;

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

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

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

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

•       the explanatory notes to the interim financial statements.

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

Basis for conclusion

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

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

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

Conclusions relating to going concern

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

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

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

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

PricewaterhouseCoopers LLP

Chartered Accountants

London

2 August 2023

1	All financial results and prior period comparators have been restated for the new accounting standard for insurance contracts, IFRS 17 and the updated definition of underlying profit. See notes 1 and 2 for further details.
2	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.
3	Relates to deferred claims liability and premium increase deferral.
4	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.
5	The HY 2023 Solvency II capital coverage ratio is an estimate and unaudited.
6	Refers to Hong Kong SAR (Special Administrative Region) across the statement
7	Garantías Explícitas en Salud
8	Our total customers as reported in 2022 Annual Report.
9	Excludes insurance customers from the associate businesses.
10	HY 2022 reported underlying profit of £378m also includes £15m impact from the change to the underlying profit definition, our non-GAAP measure of trading profit. Other and FX balances net to nil
11	The HY 2023 Solvency II capital coverage ratio is an estimate and unaudited.
12	Calculated as the impact on Own Funds using the retrospective 12-month net earned premium.
13	Group Specific Parameter (GSP) is substituted for the insurance premium risk parameter in the standard formula, reflecting the Group's own loss experience.
14	Viva is our new employee health and wellbeing programme that will provide healthcare benefits to 100% of Bupa's employees globally by the end of 2023.

 

END