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Momentum maintained in first half

18 September 2007

Bupa today announced its half year results for the six months to 30 June. Highlights include:

• Revenues from continuing operations up 10 percent to £2.1 billion
• Total insurance customers up 3 percent since year end
• Underlying surplus before tax of £172.4m, up 23 percent
• Surplus in UK Insurance lower as a result of continued investment and higher claims experience in first half
• Further strong growth in International Insurance, with good customer growth and lower claims in first half

Continued growth in Care Homes

Sale of Bupa Hospitals completed on 31 August 2007, with proceeds of £1.44bn to be reinvested in the medium term to develop and further strengthen the Group

Commenting on the results, Val Gooding, Chief Executive, said:

“BUPA has maintained strong trading momentum in the first half of 2007. Customer numbers have risen strongly, reflecting the attractiveness of Bupa’s high quality health and care services and generally favourable economic conditions in key markets.

“The Group continues to invest significant funds in the development of its core businesses. This investment, and an anticipated return to historical claims levels in International Insurance will slow the rate of growth in underlying surplus in the second half.

“We remain confident that Bupa has an attractive range of market opportunities. We will continue to invest in the business for the benefit of our customers.”

Enquiries:

Peter Jones, Bupa Nigel Prideaux / Eilis Murphy / Muna Hamza, Brunswick Review of operations

UK Insurance

UK Insurance provides private medical insurance to 4.3m customers in UK Membership and Bupa International as well as providing life assurance, income protection and critical illness cover through Bupa Health Assurance and health assessments and occupational health services through Bupa Wellness.

Revenues in UK Insurance grew by 5 percent to £956.6m compared with the first six months of 2006. Customer numbers were stable at 4.3m, with growth in all other businesses offset by a decrease in Bupa Ireland customers following the announcement of the withdrawal from the market. The operating surplus decreased by £9.6m to £28.4m; after adjusting for the reclassification of a business to International Insurance in 2007, the surplus decreased by £7.6m. This excludes a charge of £9.6m (2006: £10.1m) relating to Risk Equalisation charges in Ireland and a benefit of £10.2m in Bupa Health Assurance from a change in reserving policy in accordance with FSA rules. Notwithstanding the growth in revenues in both UK Membership and Bupa International, the surplus declined in the first six months of 2007 with a higher level of claims in UK Membership and increased development spend in the first half of 2007.

UK Membership increased member numbers by 2 percent during the first six months. The business continues to work with healthcare providers to ensure effective cost management to help limit the rate of medical inflation, without compromising patient care. UK Membership is seeing the benefits of the specialist MRI network, launched in 2006, which gives members access to leading radiologists and state of the art scanners in centres of excellence around the country. Continuing this strategy, an ophthalmic network has been launched in August 2007.

UK Membership has continued its programme of investment in a new operating system which will enable the development of a wider range of products and improved operating efficiency. Implementation is targeted for the first half of 2008.

Bupa International provides expatriate health insurance for over 330,000 customers across the world, an increase of 2 percent since the end of 2006. Industry trends show that demand for expatriate health insurance remains high with strong growth in the corporate sector.

Bupa Health Assurance has grown its customer base in the individual and group risk markets by over 14 percent during the six months to 30 June 2007, driven by product enhancements and the launch of an enhanced e-business capability for brokers. Following a change in reserving assumptions to recognise certain policy assets in accordance with FSA rule PS06/14, Bupa Health Assurance released reserves of £10.2m, benefiting the operating surplus in the first half of 2007.

Bupa Wellness increased patient assessment volumes by 5 percent compared with the same period in 2006. Also, in June 2007, Bupa announced the acquisition of a 29.9 percent stake in ADDleisure plc, an innovative player in the health and leisure sector offering exciting new services focused on positive health and wellness.

International Insurance

The International Insurance segment includes the Group’s private medical insurance businesses in Spain (Sanitas), Australia, Saudi Arabia (Bupa Middle East), Hong Kong, Thailand, IHI in Denmark and AMEDEX in the US. It also includes the hospitals and clinics in Spain, which primarily treat Sanitas’ private medical insurance customers.

Bupa’s successful international growth has continued, with revenues in International Insurance increasing by 12 percent to £740.7m compared with the first half of 2006, and the operating surplus increasing to £57.3m (37 percent growth, adjusting for the reclassification of a business from UK Insurance). This was driven by higher volumes and margins in Sanitas and Australia, partly reflecting lower claims in the first half than historically and increased utilisation in Sanitas’ new La Moraleja Hospital in Spain. Customer numbers have increased by 4 percent since December 2006 across all regions, notably in Sanitas, the Middle East, IHI and Australia.

Sanitas has increased customer numbers by 5 percent since the end of 2006. This reflected good growth in the business sector as its range of differentiated products and an increase in the direct sales force both served to attract new customers. This builds upon the strong growth achieved in 2006, when Sanitas also grew its market share.

Bupa Australia insures over one million customers and increased customer numbers by 2 percent in the period in a stable market. Continuing growth was achieved in its established markets of Victoria and South Australia as well as in New South Wales, a new market entered in late 2005. Bupa Australia continues to maintain strong cost control over both medical and operating costs.

Significant growth has continued in Bupa Middle East, the joint venture with the Nazer Group. Customer numbers in Saudi Arabia grew to over 340,000 in the first six months of 2007, an increase of 31 percent since the end of 2006. The business is benefiting from a regulatory requirement for companies to provide their expatriate employees with medical insurance.

IHI and AMEDEX, Bupa’s expatriate health insurance businesses based in Copenhagen and Miami, grew their customer base by 6 percent to just under 400,000. The two businesses are working closely with Bupa International and have already secured substantial cost savings. A fully integrated range of products will be launched in their key markets in Latin America once a product review has been completed.

The Hong Kong business has increased its customer numbers to over 150,000 since the end of 2006, representing growth of 1 percent. Bupa Thailand has just under 170,000 customers, down 2 percent from the end of 2006 due to increased competition in the local market.

Care Homes

Bupa is one of the largest providers of high quality nursing and residential care to older people in the UK and Spain, with 295 homes and over 20,000 beds in the UK and 35 homes and over 4,400 beds in Spain. Revenues grew to £309.9m, an increase of 8 percent compared with the first half of 2006, and the operating surplus grew by 13 percent to £55.0m. Organic ¹ growth in revenues and operating surplus was 6 percent and 14 percent respectively.

The UK care homes business continued to perform well despite a tightening of Local Authority budgets, resulting in lower fee increases than in previous years. While occupancy was slightly lower compared with the first half of 2006, organic growth has been achieved through tight cost management, especially in agency costs. Occupancy levels have started to improve in the second half of the year.

Bupa Care Homes continues to invest in both new developments and existing homes. Work is under way on two homes in the UK and a number of other potential new developments are at an advanced stage of planning. A significant programme of extensions of existing homes is under way with ten projects currently on site, a number of which will complete in 2007. In August 2007, Bupa completed the acquisition of Avalon Care Homes Limited, adding five new homes and taking its total UK portfolio to 300 homes. Bupa also continues to invest in the existing portfolio through a refurbishment programme designed to maintain a high quality environment for residents. The business maintains a high level of investment in

staff training and quality assurance to deliver a differentiated service to residents.

Sanitas Residencial, the Group’s Spanish care homes business, has grown both organically and through the acquisition of Euroresidencias in March 2007 and it is now the second largest care home provider in Spain. The acquisition added twelve homes and four developments in Madrid, Barcelona and Tarragona. The homes offer a comprehensive range of facilities for residents including those with special physical and mental health needs.

Outlook

In line with guidance given with the 2006 full year results, Bupa expects the rate of growth in underlying surplus in 2007 will be lower than last year. Growth in the second half will be affected by significant investment in business development and infrastructure and an anticipated return to historical claims levels in International Insurance.

Capital expenditure for the full year is expected to be higher than 2006 levels as the Group increases investment in care home development in the UK and Spain, in hospitals and medical centres in Spain, and systems in UK Membership.

UK Insurance expects to maintain its strong position in the health insurance market with continuing customer growth. Claims will remain a focus along with the close management of medical costs, to help slow the rate of premium increase for customers. The investment in a new operating system is expected to start to deliver benefits in 2008.

The International Insurance business will continue to focus on organic growth in revenues and customers, and will increase the rate of revenue investment to accelerate future growth. The business will also assess potential new geographic markets with a view to further international expansion.

In Care Homes, the business will continue to focus on maintaining occupancy levels and controlling costs, while delivering a high quality service. Care Homes will continue to expand its business in the UK and overseas.

The Group benefits from the strength and breadth of its diversified UK and international businesses, its health and care expertise, its continuing focus on improving efficiency and its strong cash generation. We remain confident that Bupa has an attractive range of market opportunities to grow strongly in the future. We will continue to invest in the business for the benefit of our customers.

1. References to organic growth in revenues and surplus exclude the effect of currency translation differences and the impact of acquisitions and disposals.

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