BUPA’s FD explains that the company is “very fortunate in some respects” to operate in the chronic medical conditions market as “it’s the biggest sector of the global economy, one we believe will continue to grow”.
It’s more of an unintentional and unfortunate turn of phrase by Tom Singer, rather than hand-rubbing joy at other people’s ill health. BUPA has, after all, provided healthcare since 1947, during the formation of the NHS.
The brand is well-known for its efforts as a private hospital provider, despite selling its UK hospitals off in 2007 to focus on expanding internationally, and driving more profits through insurance. “As an organisation I don’t think it’s generally well understood because we’re not a quoted company,” says Singer.
His exuberance for its efforts in the marketplace can certainly be forgiven, as BUPA has made great strides to diversify and expand in the last few years. Turning over nearly £7bn in 2009, with profits of £428m (known as surplus because it has no shareholders), the group is in a strong position.
More than half (57%) of its revenues come from outside the UK, with ten million customers across 190 countries. Its services include running care homes, health assessments, clinics and even travel insurance.
Analysing the risks facing a business operating in a diversified market, across a backdrop of dozens of different legislative environments is a responsibility that sits squarely on Singer.
The UK government, for example, is currently turning local healthcare upside down with the abolition of primary care trusts and strategic healthcare authorities, with budgeting and decision-making devolved to GPs.
But Singer and BUPA aren’t going to rush into any ill-informed decisions about what it means for them, instead remaining cautiously optimistic that its good relationship with the NHS will prove valuable.
“It’s fair to stay those plans have been mapped out at 50,000 feet, and we’re yet to see the final detail of how that will operate in practice, but a number of our businesses serve and have aspirations to serve the NHS. For example, looking after people in their homes as opposed to hospitals – it’s better for the patient to be in a familiar setting, and the NHS care can then be delivered at a lower cost,” he explains.
BUPA’s model doesn’t just contain vast swathes of political and competition risk. As an insurer, it is also heavily focused on dealing with the rigours of the latest insurance risk legislation Solvency II.
The legislation has an insurer’s capital adequacy as its core, risk management, and greater transparency in terms of information to be disclosed to the market around its decision-making and internal controls.
BUPA’s finance function has tipped over 700. “That’s creeping up,” says Singer, “and partly because we’re having to invest more, given the need to address the regulatory agenda”.
Singer insists that BUPA is supportive of the new rules, with the group focusing on the positive effect it will have on how the company makes decisions, understands risk, and communicates this to the outside world.
“If you took the approach that you were going to see it as purely compliance and do the minimum required to keep the regulator comfortable, you lose an opportunity to evolve and reform some aspects of the organisation.
“As a management team we’re investing a huge amount of time and money into this. We feel we have to deliver an improved business that understands its risks better, makes better quality decisions, is more astute in managing capital and has a better relationship with regulators and markets. If we can achieve that, then the end result justifies the investment we’re making in it.”
As a former McKinsey management consultant, Singer is under no illusions that forming the culture around new ways of doing things is crucial to any change management programme’s success. “If we can paint that in ways people can relate – there’ll be a lot of hard work – we’ll be successful in embedding Solvency II.”
Perhaps it’s in part to Singer’s consulting background, but he is comfortable talking at a rate of knots, on a multitude of different topics. Almost breathlessly, and as an antidote to talk about compliance, he explains that the finance function is primarily about driving and informing strategy.
Due to BUPA’s vast reach, the business has more opportunities on which it can move on at any one time.
The executive team headed up by CEO Ray King, an accountant and former BUPA FD, apply a “consistent and robust criteria” to establish what projects to invest in. Finance plays a very important role in that debate, says Singer.
Finance is also at the table for most, if not all, key commercial decisions taken by the business, “be it pricing of insurance policies, determining whether to go into a new country market or build a new hospital”.
Besides the expanding risk division at BUPA, its finance function is set up in what Singer describes as a “fairly conventional” structure. Its central function is supported locally, and each business line has its own finance team. But the depth of debate finance takes in helping the business make choices is key. “It is its central role in advising, challenging and sifting information and opportunities that really makes it stand out as different compared to functions I’ve worked with in the past,” he explains.
Having joined in 2008, BUPA was already in the throes of moving out of its traditional strongholds of the UK and Spain. Alongside its international development, finance managed to help maintain BUPA’s financing and solvency through the credit crunch.
Without shareholders in the traditional sense, BUPA has bondholders to answer to and educate about its offerings.
“We did [refinance], and did so successfully. The great thing about BUPA is the City views us as a very stable and attractive investment proposition because they know the background factors – ageing population, growing burden of chronic disease, are long-term trends that will only go one way. We’ll move and exploit those trends.”
Singer’s background is a varied one, to say the least. But he does know a thing or two about the City, despite his current lack of interaction compared with previous roles.
“My investor relations responsibilities are not as extensive as in other jobs, but I do enjoy going out and telling the BUPA story,” he says.
Previous positions include group FD and then COO at William Hill and FD at Moss Bros, where his city relations skills were sometimes pushed to the limit. Singer joined Moss Bros after ten years at Price Waterhouse and McKinsey. Putting his business skills to the test, or “on the other side of the desk” as he puts it, he felt the adverse effect of fashion trends.
As dotcommers boomed, many suit retailers went bust, with executives preferring the ‘Microsoft look’ of shirts and chinos.
“We went from expansion to quite severe cost cutting and retrenchment and, as an FD, I was relatively young. I had to give three profit warnings in 18 months… It was a fairly formative experience but very valuable,” he says with an embarrassed chuckle.
At William Hill, Singer took the private equity-owned business public. The gambling explosion, driven mainly by online access, benefited William Hill and propelled it to the edges of the FTSE 100. Promoted from CFO to COO he ran its 2,200 shops, call centres and took charge of integrating its Stanley Leisure acquisition.
Betting’s a “fascinating world”, says Singer, because of the adversarial nature of the relationship between the gambler and the ‘bank’.
He also jokingly refers to all his previous jobs as the same type of business, in that it’s “a question of what risks you’ll accept and how you price them, just different in terms of customer relationship”.
But there were serious reasons behind his switch from retail and leisure into healthcare. Singer’s wife died of cancer three years ago, and its mission to help people live longer and happier lives “struck a chord”.
“It was important for me on a personal level, where I felt I could practice my professional discipline but in an organisation in which I believed, and that’s why BUPA appealed.”
He makes a point of going out in the field to experience healthcare first hand, which included a recent three-day trip to New Zealand, where he saw the level of commitment of colleagues who help residents “day in day out”.
Singer reins in the emotional aspect of his career choice, and the type of business he works in, saying that “we’re absolutely profit motivated, unashamedly commercial, and all decisions go through a commercial lens”.
Yet it’s impossible for him to separate that from the importance of treating the customer well, and the importance of the type of care they provide.
“I wouldn’t say [it’s a] conflict. That’s what makes this organisation special – this financial imperative but also strong customer focus that is more palpable than anywhere else I’ve worked.”
Fit for purpose
BUPA’s global expansion has put stresses and strains on the finance function around the sheer volume of transactional work it has undertaken.
BUPA finance director Tom Singer says that its transformation into an international group has highlighted flaws in its system, which required improvement.
“I think we realised that some of our internal processes and systems were just not able to cope with the increasing demands of being a large international group… we had to invest – and are investing – in upgrading those.”
Part of finance’s improvement will come from looking for intellectually strong and “intensely commercial finance leaders”.
“I expect them to be able to add the numbers up, that’s not what I value most from them. You need first-rate people both at the centre and in the business who can demonstrably add value, so that’s been part of the journey we’ve been on over the past couple of years – to progressively upgrade the quality of the finance professional.”
At the heart of BUPA
From discovering a potential market opportunity, to finalising a deal, it requires an important flow of data from BUPA’s regions back into the central team.
The local team puts together a business case, then its finance team is “instrumental” in putting together the financial data around the plan.
Back at head office, the finance function then sifts through the information.
“We look at the overall strategy and whether we believe what we’re being asked to finance is a robust and well thought through commercial proposal,” explains BUPA FD Tom Singer.
“At the heart of our decision-making is constantly comparing returns on capital and risk, to try and make sure that we’re effectively bankrolling the very best ideas and give us the greatest returns and the ones that allow us to advance strategically.”
Ideas feed into the “development hopper”. “Sometimes they get bankrolled and approved, sometimes we ask for further work and it goes back into the hopper, or sometimes it’s kicked into touch.”
Name Tom Singer
2008 Finance director, BUPA
2000 Group FD/COO, William Hill
1997 Finance director, Moss Bros
1992 Management consultant, McKinsey & Co
1984 Manager, Price Waterhouse
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