Bupa: Result reflects 'difficult market conditions'

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Bupa has announced its financial results for the twelve months to the end of December 2019, confirming while revenue increased by 3 per cent to $8.6 billion its underlying profit decreased by 47 per cent (constant exchange rates) to $294 million.

Australia's largest private health insurer is also a significant provider of aged care services while its health services businesses administers the new Australian Defence Force contract.

The company said the fall in profit reflected "difficult market conditions" and was "largely as a result of margin pressures in health insurance and challenges in our Australian aged care businesses."

"In addition, there were non-underlying items of $305 million, including $320 million relating to the impairment of goodwill in our Australian aged care business," it said.

Revenue in its Australian health insurance business was "stable" but underlying profit decreased by 32 per cent compared to 2018.

It said, "This was largely driven by increased claims inflation and volumes which significantly exceeded government approved premium increases, together with lower growth in younger customers taking up insurance as well as significant investment in information technology to enhance security, privacy and digital services."

The insurer, which provides private health cover for around four million Australians, said the full impact of these factors was partially mitigated by cost efficiency initiatives.

"Net Promoter Scores and customer retention significantly improved as a result of our focus on enhancing customer experiences through process and system changes, and more effective communications," it said.

"We are committed to delivering value for money for customers, addressing affordability issues and reducing out-of-pocket costs, while also supporting further health insurance reform."

In aged care, the company said revenue was down and underlying profit also decreased significantly, driven by lower occupancy and higher operating expenses.

"Our closing occupancy rate of 83% was 9ppts lower than the same period last year. The number of care homes operating under regulatory sanction during 2019 decreased from a maximum of 15 to five at the end of the year.

"We continue to work closely with the Department of Health and the aged care regulator, while investing significantly in improved care and support for our residents and their families.

"During the year, we engaged with the Royal Commission into Aged Care Quality and Safety, which is examining the entire aged care system to deliver improvements for residents now and in the future. The Commission’s interim report was delivered in October."

The company said its New Zealand aged care business performed in line with expectations. "Revenue decreased on last year reflecting the impact of some divestments made in 2018, while lower like-for-like occupancy and higher staffing costs decreased underlying profit. At year end, our occupancy rate was 89%, down 2ppts on last year," it added.