Bupa’s Results Show Strong Growth In Emerging Markets
By Thomas | Published March 09, 2011
British United Provident Association (BUPA) announced results for the year ending 31st December 2010, with strong international sales contributing to a 9 percent jump in revenue to total £7.58 billion (US$12.12 billion) for the year.
However, the health insurers’ surplus before taxation expense was down by 72 percent to £118.0 million (US$188.8 million) from £416.5 million (US$666.4 million) reported in 2009, mainly due to goodwill impairments of £249.2 million (US$398.7 million).
Bupa’s overall revenue was up 9 percent compared to 2009 reaching £7.58 billion (US$12.1 billion); this reflects a 4 percent growth from organic activities and a 5 percent benefit from favourable foreign exchange movements. The key drivers for improvements in sales were Bupa’s international businesses in Asia, Latin America, Australia and Saudi Arabia; the improvements from these sources offsetting static sales in the UK, North America and Spain during 2010.
Bupa’s underlying surplus before taxation amounted to £464.9 million (US$743.8 million) representing a 9 percent improvement year-on-year primarily down to the positive performance in Australian and Asian healthcare markets.
The Bupa Health and Wellbeing UK (BHW) brand also produced sound results contributing to the health insurer’s profit margin following the restructuring of this business sector.
Bupa struggled in some established markets – particularly in the UK, US and Spain – during 2010, with new sales remaining static in line with the very tough economic conditions applicable in western hemisphere countries.
Buoyant sales in Asian, Latin American and in Middle Eastern countries, along with a new business activity in Australia, helped the company offset the loss of growth in previous dominant markets.
A key driver for Bupa’s robust international sales figures resulted from the market for expatriate health insurance. This activity strengthened in 2010 with increased mobility by expats searching for new opportunities as economic conditions deteriorated in Europe and the US causing high levels of unemployment; Bupa was able to capitalize on this trend, being one the leading insurance providers for expatriate health insurance.
In Asia, Bupa saw profitability levels increase as higher customer numbers helped revenue from international activity reach £3.39 billion (US$5.42 billion) in 2010 – up from £2.83 billion (US$ 4.52 billion) in 2009. This represented a 20 percent increase in revenue generating a business surplus of £208.9 million (US$334.2 million) in 2010.
Bupa’s fledgling operations – Bupa Arabia and Bupa Australia – have generated new customers: now there are over 1 million BUPA policyholders from the Middle Eastern operation and over 3.2 million customers in Australia. Bupa Arabia’s sales have benefited from the health insurance legislation in place in Saudi Arabia, which requires all expatriate residents in the country to hold private health insurance.
There was a notable growth in sales in Hong Kong and Thailand which saw customer numbers increased by 12 percent and 9 percent respectively. Health insurance delivered a good performance in both countries with new sales growth and high retention of existing customers.
MaxBupa, the standalone Indian health insurer, was initiated by Bupa in 2010. It now has a presence in nine cities and has established a network link with over 700 hospitals across India. Bupa is in a strong position in India through their MaxBupa venture, which has already secured a sound reputation with over 27,000 customers in a market set to expand as economic conditions strengthen.
Speaking on Bupa’s 2010 results, Chief Executive, Ray King, said: ‘We achieved strong growth in our insurance businesses in Australia and Asia and increased operational efficiency in our businesses in Europe and North America, where market conditions were more challenging.”
Bupa is expecting business to grow in 2011 particularly in the expanding Asia-Pacific and Latin America regions, where there is an increasing demand for quality health insurance. The momentum within these two emerging regions and Saudi Arabia are expected to drive profits for the international health insurer and create an increasingly diversified customer base.
While growth is expected in emerging markets, Bupa is anticipating challenging conditions to continue in its traditional markets in the UK and the USA with sales likely to be inhibited as economic conditions are impacted by austerity measures being applied nationally. While unemployment numbers remain high in the UK and the USA, both individual and corporate health insurance sales are expected to be frustrated.
As global demands change, Bupa will seek to penetrate new markets and strengthen its foothold in emerging markets where a presence has been recently been established. The health insurer also plans to develop its product range and quality of service in order to promote sales growth.
The UK based health insurer took a major strategic decision in 2007 and sold its private hospital network within the UK in an ambitious step to focus on the core private health insurance and care market. The £1.44 billion (US$2.2 billion) capital generated from the sale of private hospitals was used to strengthen Bupa’s global presence which is now reaping financial benefits.
In the medium term, Bupa is planning to grow by responding to demands from highly populous emerging markets where action has been taken to establish a presence.
Bupa’s global reputation has made it one of the leading multinational health insurers and it is a strong favourite with expatriates seeking health insurance cover. This sector of business has helped Bupa to increase sales during 2010 and it is expected to be a major contributor to trading activities in 2011.
Across the group, Bupa retains a strong market position with a sound financial standing. It is, therefore, well placed to meet the prevailing challenges in 2011 including pressures arising from the spread of chronic diseases, the rise in ageing populations and changing consumer and national government expectations about the services required from companies in the health insurance and care business.
Insurance Company Mentioned:
Bupa was established more than 60 years ago in the UK and is now has ten million customers in over 190 countries, and over 52,000 employees around the world. Bupa is a leading international healthcare provider, offering personal and corporate health insurance, workplace health services and health assessments. As a provident association Bupa has no shareholders, because of this it uses its profits to invest in healthcare and medical facilities around the world. Bupa has operations around the world, principally in the UK, Australia, Spain, New Zealand and the US, as well as Hong Kong, Thailand, Saudi Arabia, India, China and across Latin America.